After You Graduate - Guide to Repaying (eBook)

7/30/2019 After You Graduate - Guide to Repaying (eBook)

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This publication focuses on repayment of federal loans and is intended to supplement the information you

receive in exit counseling conducted by your school. Its not intended to replace the exit counseling program

offered by the school you attend. The information presented in this publication also should be helpful in

planning for and managing repayment of all your student loans. The information in this publication is current

as of March 2012.

Borrower ReminderYoure required to repay your loans along with any interest and fees that are assessed according to the terms

of the promissory note and repayment schedule. Full repayment is required even if you dont complete your

program of study, dont complete the program within the regular completion time for that program, dont

obtain employment upon completion of your degree, are dissatisfied with the education or other services you

received from your school, or dont receive a monthly billing statement from your loan servicer.

Table of ContentsRepaying Your Student Loans ................................................................................................2

Understanding Loan Repayment Terms ................................................................................................ 4Repayment Plans ...................................................................................................................................... 10Loan Prepayment ...................................................................................................................................... 15Borrower Benefits ...................................................................................................................................... 15Identifying Your Financial Goals .............................................................................................................. 16Establishing Your Spending Plan ............................................................................................................ 18Picking the Repayment Plan Thats Best for You .................................................................................

21Understanding Your Rights and Responsibilities................................................................................... 26Keeping Good Financial Records ............................................................................................................ 32Summary .................................................................................................................................................... 34Office of the Ombudsman U.S. Department of Education ................................................................. 35Tips for Managing Loan Repayment ...................................................................................................... 35Terms You Should Know ........................................................................................................................... 36Your Borrower Rights and Responsibilities ........................................................................................... 40Helpful Online Resources ......................................................................................................................... 42


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After You Graduate: A Guide to Repaying Your Student Loans

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Repaying Your Student Loans:A Guide to Picking the Repayment Plan Thats Right for You

The thrill of graduating and a bit of reality about whats next

Congratulations on completing your degree. You studied hard, worked long hours

and survived. Of course, you still have a few things on your plate and one of those

is the reality of repaying your student loans. Youve already proven youre up to the

challenge of graduate and professional school, so youll get through this as well.

Whats more, your loans are an investment in your future. A good investment. And

as youre about to learn, there are ways to manage repayment without becoming

overwhelmed. Thats what this workbook is about.

Take time out to plan

Soon enough youre going to have to make decisions, but you have time to breathe and

work out a few things. You should start by sitting down and identifying some goals. What

is it you want to do over the next couple of years? The next 10 or 20? You dont have to

have all of the answers now, but it will be helpful to have an idea. Theres a worksheet

provided in this workbook that can help. It will have you look at things such as your

expected lifestyle and when you hope to reach different financial milestones. Theres

also a worksheet thats intended to get you thinking about your personal spending plan.

We suggest you go through the worksheet before you celebrate your degree by buying a

new car or giant screen television. Creating a personal spending plan will help you to

focus on the real cost of things, how quickly those costs add up, and how your student

loans fit into the mix. This doesnt have to be overwhelming, but it does require planning,

discipline AND picking the right loan repayment plan.

Its not so much juggling as prioritizing

Just as you have things you own, there are others that you owe. Of course, this includes

your student loans. You may also have credit card debt, a car loan, maybe even a

mortgage. Eventually youll want to eliminate all (or at least the majority) of your debt,

but for most people at this stage of their lives that isnt possible. Instead what you want

to do is leverage your debt. For example, federal student loans come with relatively low

interest rates. So one possibility is to lower your monthly payments on your federal

student loans by extending your repayment period and using the money available each

month to pay off the debt on loans with higher interest rates. That way you pay off themore expensive debt sooner. Even if you only have federal student loan debt, you might

still consider extending the repayment period on Federal Subsidized and Unsubsidized

Loans in order to prepay higher cost Grad PLUS loans. It is these tricks of the trade

that this workbook can help you discover. Most importantly, remember that choosing the

right repayment plan can make a difference in your future financial situation.


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Stay with the program

Okay, this might not be exciting, but it is very important. Stick with this workbook and

youll gain valuable insight into how you can successfully repay your student loans and

achieve your other financial goals. Youve worked too hard in school to ease up now.

To help you decide on the best repayment plan for you, this book will focus on the

following six elements:1. Understanding the repayment terms of your federal loans

2. Identifying your short- and long-term goals

3. Establishing your personal spending plan

4. Picking the repayment plan thats right for you

5. Understanding your rights and responsibilities as a borrower

6. Keeping good financial records

On each page theres room to write down any questionsyou have while reading this workbook. If these questions arent

answered by the time you finish, contact your schools financialaid office and/or your loan holder/servicer for clarification. Itsimportant to understand all aspects of repayment if youre to

succeed in repaying your student loans.

Activity I Get It!Once youve completed this workbook, you should understand the following concepts related to loan

repayment. Put a check mark beside each item when you feel youve got it covered.

K Master Promissory Note K Borrower rights and responsibilities

K Interest rates K Loan discharge, forgivenessK Who you must repay K Role of spending plans in repayment

K When loan repayment begins K Importance of identifying financial goals

K Available repayment plans K Tools to help in repayment

K Deferment/forbearance options K Picking your repayment plan

K Loan prepayment K Keeping good financial records

K Default and its consequences


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Understanding Loan Repayment TermsBeginning repayment of your student loans can often seem like a confusing and complex

process. Successful repayment requires that you understand the basics of your loans

and the repayment plans available to you.

Changes, Changes, Changes

Federal education loans are low-cost loans that are

guaranteed by the federal government. Prior to July 1, 2010,

two federal loan programs existed: the Federal Family

Education Loan (FFEL) Program and the Federal Direct Loan

(FDL) Program. Institutions decided which program to

participate in and students either borrowed from the

commercial lenders in the FFEL Program or directly from the

federal government in the FDL Program. As of July 1, 2010,

federal education loans can only be originated through theFederal Direct Loan Program. This means you may have loans

in both programs. The terms and conditions of the two

programs are very similar; however, there are some

differences. This guide will make every effort to document

when a particular detail is specific to a particular program.

Available loans for graduate students in the Federal Family Education Loan

Program were:

Federal Subsidized Stafford Loans;

Federal Unsubsidized Stafford Loans; and

Federal Graduate PLUS Loans.

Often these Federal Subsidized and Unsubsidized Loans, are referred to as the Federal

Stafford Loan Program.

Loans that were and still are available for graduate students in the Federal Direct Loan

Program are:

Federal Direct Subsidized Loans;

Federal Direct Unsubsidized Loans; and

Federal Direct Graduate PLUS Loans.

The Master Promissory Note

You completed a Federal Loan Master Promissory Note (MPN) in order to borrow from

the Federal Stafford Loan Program and/or the Federal Direct Loan Program, as well as a

Federal PLUS Loan Application and MPN to borrow a Federal PLUS Loan. The MPNs are

the legally binding contracts between you and the lender of your loans. In signing these

documents, you agreed to repay the funds you borrowed along with any interest that

accrued and fees that were charged.


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Federal Stafford and Federal Direct Subsidizedand Unsubsidized Loans

The subsidized and unsubsidized loans in both programs are very similar.

A subsidized federal loan is a need-based loan on which interest is paid by the federal

government while youre in school, during the grace period, and during approveddeferment periods. Conversely, interest on an unsubsidized federal loan begins accruing

as soon as the funds are disbursed by the lender. Youre responsible for paying all

interest that accrues on an unsubsidized loan. You may either pay the interest during in-

school, grace, and approved periods of deferment and forbearance, or the interest will

be deferred and capitalized (added to the principal balance) prior to repayment.

Federal PLUS Loans

Graduate and professional students are eligible to borrow a Federal PLUS Loan,

commonly referred to as the Grad PLUS Loan. Also available to the parents of

dependent undergraduate students as the Parent PLUS Loan, this is an unsubsidizededucation loan that has no grace period, and thus goes into repayment as soon as

funds are disbursed to the borrower. However, the Grad PLUS Loan has deferment and

forbearance options similar to those of the Federal Unsubsidized Loan. As such,

graduate and professional students can postpone repayment using the In-School

Deferment while enrolled at least half-time in an eligible program of study. You also may

be eligible to postpone repayment once youre no longer enrolled as a student. For

example, Grad PLUS Loans first disbursed on or after July 1, 2008, are eligible for an

automatic six-month post-enrollment deferment.

This will allow you to begin repaying your Grad PLUS loans at the same time as your

unsubsidized or subsidized loans. You can request forbearance from your loan servicer

on Grad PLUS loans first disbursed prior to July 1, 2008, for the same purpose.

During any period of deferment or forbearance, interest can accrue and be added to the

principal loan balance (capitalized) at the end of the deferment or forbearance period if it

is not paid by the borrower as it accrues. More information about deferment and

forbearance is provided later in this workbook.

Interest Rates

The interest rate is the percentage youre charged by the lender to borrow the loan

funds. As noted earlier, in the case of federal subsidized loans, the federal government

pays the interest that accrues during in-school, grace and approved deferment periods.For federal unsubsidized loans and the Federal PLUS Loans, you must pay all of the

interest that accrues. You may choose to delay payment of this interest until repayment

begins; however, the accrued interest will be capitalized (added to the principal balance)

before repayment begins and at the end of any deferment or forbearance period.

Whatever the case, youre responsible for paying the interest that accrues during the

repayment period.


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Federal Stafford and Federal Direct Subsidized and Unsubsidized Loans

(borrowed by graduate and professional students)

Loans with a first disbursement on or after July 1, 2006:

Fixed rate of 6.8%

Loans with a first disbursement on or after July 1, 1998, but before

July 1, 20061 have a variable interest rate:

Subsidized:

During in-school, grace, and deferment periods: interest paid by the

federal government

During repayment and forbearance: 91-day U.S. Treasury Bill

(T-bill) + 2.3%

Unsubsidized:

During in-school, grace, and deferment periods:

91-day T-bill + 1.7%

During repayment and forbearance: 91-day T-bill + 2.3%

1Contact your current loan servicer for information on the interest rate of any Federal Stafford Loanborrowed prior to July 1, 1998.

An important note about the variable interest rate on federal loans: As you can see,

the interest rate is variable for federal loans with a first disbursement on or after July 1,

1998, but before July 1, 2006. This variable rate is reset each year on July 1. Its based

on an index the bond equivalent rate of the 91-day T-bill auctioned at the final

auction before June 1 of each year plus a per annum percentage margin (i.e., thespread). The variable rate also can change because the status of the loan changes

from an in-school to an in-repayment status, for example, as shown above.

The interest rate on these loans is capped at 8.25%. Youll be notified of interest rate

changes throughout the life of your loan by your loan servicer.

Federal PLUS Loans

The interest rate on Federal PLUS Loans in the FFEL Program with a first disbursement

on or after July 1, 2006 is fixed and equal to 8.5%. (Loans first disbursed prior to July 1,

2006 have variable rates.)

The interest rate on Federal Direct PLUS Loans with a first disbursement on or after July

1, 2006 is fixed and equal to 7.9%. (Loans first disbursed prior to July 1, 2006 have

variable rates.)


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Partners in Loan Repayment

The following organizations may be involved with your student loan repayment:

U.S. Department of Education the federal agency that administers several

major student aid programs, including the Federal Direct Loan Program.

It produces, distributes, and processes the Free Application for FederalStudent Aid (FAFSA), which was used to determine your eligibility for federal

funds. Also performs the function of lender for the Direct Loan Program.

Lender the bank, savings and loan company, credit union or other

approved organization from which you borrowed the loan.

Holder the party that currently owns the loan and holds its legal title.

Guarantor a state agency or private, nonprofit organization that insures

lenders against losses due to a borrowers default, death, disability or

bankruptcy.

Secondary Market an organization that buys loans from lenders. Selling

loans is a common practice among lenders, so the institution ororganization you make your payments to may change during the life of the

loan. The terms and conditions of your loan dont change when its sold to a

secondary market holder.

Servicer a company that specializes in handling loan repayment activities

such as billing, collections and deferments. Many lenders hire servicers to

manage student loan repayment activities. This typically is the first

organization to contact if you need assistance during loan repayment.

Who You Repay

Federal Family Education Loan Program

You repay the holder of your loans promissory note. This may be the original lender or a

subsequent lender or secondary market to which your loan was sold. In addition, the

holder may contract with a servicer to manage some or all of the transactions

associated with repayment. If a servicer is being used, you first should contact the

servicer with any questions or concerns you have about your loan(s). Remember, if your

loan was sold, the current holder will not be the original lender. Youll be notified in

writing if your loan is sold or if there is a change in servicer. If you want to identify your

loan servicer you can access your loan information at www.nslds.ed.gov.

Federal Direct Loan ProgramThe Department of Education contracts with third party companies to service loans in

the Federal Direct Loan Program. To determine who is servicing your loans you can

access your loan information at www.nslds.ed.gov.


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National Student Loan Data System (NSLDS)

You can obtain information about your Federal Title IV loans and

grants from the National Student Loan Data System (NSLDS) at:

Toll-free telephone: 800-4FED-AID (1-800-433-3243)

Website: www.nslds.ed.gov

The National Student Loan Data System (NSLDS) is a confidential database that is

maintained by the U.S. Department of Education. Its an excellent source of information

about who currently holds/services your federal student loans, how much you owe, and

the current status of each loan.

Youll need your PIN to access your information on NSLDS. This is the PIN that was

assigned to you when you completed the FAFSA or Renewal FAFSA. If you dont know

your PIN, theres information on the NSLDS website on how to obtain a new one or you

can apply for a new PIN online at www.PIN.ed.gov.

When Repayment Begins

Some student loans enter repayment following a grace period. Other loans enter

repayment as soon as they are fully disbursed. In most cases, federal loans are placed

immediately in an in-school deferment as long as youre enrolled at least half time as a

student. The in-school deferment ends when you drop below half-time enrollment. If the

loan has a grace period, it begins when your enrollment status drops below half time

and ends when the loan enters repayment. Typically, your first payment on a federal loan

is due within 60 days after entering repayment.

Interest continues to be paid by the federal government on federal subsidized loans

during the grace period. Federal unsubsidized loans continue to accrue interest during

the grace period, but the accrued interest does not have to be paid at that time; it can

be capitalized (i.e., added to the principal balance) when repayment begins.

The length of the grace period varies by loan type and should be specified in the loan

promissory note. The current grace periods for the following student loans are:

Federal Stafford Loans 6 months

Federal Direct Subsidized and Unsubsidized Loans 6 months

Federal PLUS Loans No grace period

Federal Direct PLUS Loans No grace period

Federal Consolidation Loans No grace period

Federal Perkins Loans 9 months

Private Loans Check promissory note


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The purpose of the grace period is to give you time to get on your feet financially and

prepare for repayment. Its important to remember, however, that you should not base

your monthly spending plan on the amount of discretionary income youll have during the

grace period. Because youre not required to make loan payments during the grace

period, you probably will have more discretionary income than youll have oncerepayment begins. This can give you a false sense of wealth and might lead to financial

choices that cant be sustained once you start repaying

your student loans.

Make sure you create your spending plan to

accommodate your monthly loan payments after all

grace periods have ended and repayment has begun

on all loans.

If the loan doesnt have a grace period, you may be able

to request a deferment or forbearance (if one is not provided automatically by

your loan holder/servicer) in order to postpone repayment of the loan and/or alignrepayment with the repayment on loans you borrowed that do have a grace period.

Prior to the start of repayment, youll receive a repayment schedule for each student

loan you borrowed while in school. Among other things, it will list:

the total amount you owe;

your estimated monthly payment amount (based on the Standard 10-year

fixed Repayment Plan);

the date your first payment is due;

information about the different repayment plans and how to select the best

plan for you; and where payments should be mailed.

If you dont receive this schedule at least one month prior to the start of repayment,

contact your loan servicer.


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Pay close attention to your graceperiod when creating your

spending plan.


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Repayment PlansThere are various federal loan repayment plans available. Specifically, there are five

repayment plans available for repaying Federal Stafford and Federal PLUS Loans and five

repayment plans offered for repaying Federal Direct Subsidized and Unsubsidized and

Federal Direct PLUS Loans. Four of the repayment plans crossover both programs.

You can choose the repayment plan that best meets your needs based on your financial

goals and what you can afford to pay each month. You can change your repayment plan

as frequently as every 12 months, if necessary.

FFEL

Program

Only

Income-

Sensitive

FDL

Program

Only

Income-

Contingent

Both

Standard

Graduated

Extended

Income-Based


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The following chart provides a brief summary of each plan. It highlights the differences in

payment structure (fixed payments or payments that can change over time) and the

maximum length of the repayment period (10 25 years).


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Maximum

Repayment

Options Payment Structure Period Additional Features

Standard* Fixed 10 years - Highest initial payment

- Lowest total interest

- No negative amortization

Graduated* Changes incrementally 10 years - Interest only payments initially

over time - Payments increase incrementally


- Monthly payments cant be more

than three times greater than any

other payment (3 times rule)

Extended* Fixed or graduated 25 years - Lowest initial payment without

considering income


- To qualify:

- Debt must be > $30,000

- First borrowed on or after 10/7/98

Income- Can change annually 15 years - Subject to 3 times rule

Sensitive** based on total gross - No negative amortization

income - Eligibility/payment amount

re-evaluated annually

Income-Based Can change annually 25 years - Payment is 15% of disposable

Repayment (IBR)* based on: income if experiencing partial- Household AGI financial hardship

- Household size - Eligibility/payment amount

- Poverty guideline re-evaluated annually

- State of residence - Negative amortization allowed

Income- Can change annually 25 years - Payment is lesser of repayment

Contingent*** based on: amount if repaid in 12 years

- Household AGI multiplied by an income

- Household size percentage factor that varies with

- Poverty guidelines your annual income or 20% of your

- State of residence monthly discretionary income

- Payment amount re-evaluated

annually

- Negative amortization allowed

Repayment options available for:

*Federal Family Education Loan Program or Federal Direct Loan Program

**Federal Family Education Loan Program only

***Federal Direct Loan Program onlyTo qualify, borrowers must have a total loan debt in excess of $30,000 in one or both federal loan programs, independently.


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Standard Repayment (FFEL and FDL)

In this plan, you pay an equal (fixed) amount each month for up to 10 years. The monthly

payment on a Federal Stafford Loan and/or a Federal Direct Subsidized or Unsubsidized

Loan with a variable interest rate will be adjusted whenever the variable rate changes

(once a year on July 1). Each payment includes both interest and principal. The minimummonthly payment is $50, but your actual payment amount and repayment period will

depend on the total amount owed. If for one reason or another you neglect to choose a

repayment plan, your loan servicer will place your loan(s) in this plan. This plan has the

highest initial monthly payment, since payments include both interest and principal, but

it also has the lowest cost in total interest paid over the life of the loan. This may be the

right option for those who wish to be debt-free as quickly as possible.

Graduated Repayment (FFEL and FDL)

Under this plan, the minimum monthly payment amount increases at specific intervals

over time. Initial payments are lower than under the Standard Repayment Plan becauseearly payments typically cover only the accrued interest each month. As principal is

included in the payment the minimum monthly payment amount increases. In addition,

no payment can be three times greater than any other payment. The total interest cost is

higher over the length of repayment with this plan than with the Standard plan. The

repayment period with this plan is 10 years.

Since the monthly payment can increase significantly at the specified intervals, the

Graduated plan is generally best suited for those who expect large salary increases at

predictable points in time. Before selecting this plan, be sure that youll be able to afford

the increased monthly payments at the higher levels. All lenders are required to offer at

least one graduated repayment plan; they may offer multiple graduated options.

Extended Repayment (FFEL and FDL)

Eligible borrowers can extend their maximum repayment period to 25 years using either

fixed or graduated monthly payments. The cost in interest is greater over the life of the

loan with this plan, but the money youre not paying each month on your loan(s) gives

you flexibility to pay other expenses, including paying off higher cost debts such as those

you might have on your credit cards, or to invest for the future (provided youre able to do

so at an average rate of return that you expect to be higher than the interest rate youre

paying on your student loans). Plus, there is no penalty for prepaying your loans, so you

can pay more during the months you have extra money, if you choose to do so.

This plan is available to borrowers whose total program specific debt exceeds $30,000

and whose first federal loan was borrowed on or after October 7, 1998 (or who, on the

date a post-October 7, 1998 federal loan was obtained had no outstanding federal

balance on a loan obtained prior to October 7, 1998).

For example, if you have loans in both the FFEL and FDL Programs, the extended

repayment option is only available if you have in excess of $30,000 in both programs

separately.


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Income-Contingent Repayment (ICR) (FDL only)

Borrowers with Federal Direct Subsidized, Federal Direct Unsubsidized and Federal Direct

Grad PLUS Loans are eligible for this repayment plan. Monthly payments are

determined annually based on income (and spouses income, if married), family size,

and the total amount of Federal Direct Loans. Any remaining loan balance is forgivenafter 25 years of repayment. Under current IRS regulations, the amount forgiven is

considered taxable income.

Income-Sensitive Repayment (ISR) (FFEL only)

With this plan, available to borrowers with Federal Stafford and Federal Grad PLUS

Loans, your monthly payments are based on your anticipated total monthly gross

income and student loan debt, and are reviewed and adjusted, if necessary, annually.

The monthly payment can be no less than the amount of accrued interest and no more

than three times greater than any other payment. You must provide any requested

income documentation to qualify for this plan. This documentation allows the loanservicer to determine a reasonable monthly payment amount. If the loan servicer

considers the reported income to be insufficient to repay the loan within 10 years, the

repayment period may be extended up to an additional five years. This plan results in

higher total finance charges than under the Standard plan because loan principal is not

repaid at the same rate as in that plan. Youll need to reapply for this plan each year and

must provide requested income documentation.

Income-Based Repayment (IBR) (FFEL and FDL)

This plan is available to repay a Federal Stafford Loan, Federal Direct Subsidized and

Unsubsidized Loan, Federal Grad PLUS Loan, Federal Direct Grad PLUS Loan, Federal

Consolidation Loan or Federal Direct Consolidation Loan (not including consolidationloans that included the payoff of a Parent PLUS Loan). To qualify for this plan, you must

be experiencing partial financial hardship at the time you enter the plan. Partial

financial hardship exists when the annual amount youd be required to pay under the

Standard Repayment Plan exceeds 15% of your disposable adjusted gross income.

Disposable adjusted gross income is defined as that portion of your household

adjusted gross income that exceeds 150% of the poverty guideline for your household

size and state of residence. As such, the monthly IBR payment is based on your

households adjusted gross income, your household size, and the poverty guideline for

your household size and state of residence. Payments change as these factors change.

Once in IBR, your monthly payment is the LESSER of: 15% of your disposal adjusted

gross income (as defined above), or the amount required under the Standard (10-yearfixed) Repayment Plan at the time you entered IBR. The maximum repayment period is

25 years. Any eligible debt remaining after 25 years of being in this plan will be forgiven

by the federal government. Under current IRS regulations, the amount forgiven may be

treated as taxable income in the year its forgiven.

Eligibility for and determination of a reduced payment amount must be re-evaluated and

adjusted, as needed, annually. You are required to provide verification of both your

household adjusted gross income and household size each year youre in IBR.


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A Quick Summary of Income-Based Repayment (IBR): Calculated payment is 15% of disposable income Disposable income is that portion of household adjusted gross

income that exceeds 150% of the U.S. Department of Health and

Human Services (HHS) Annual Poverty Guideline for your household size

and state of residence

Monthly payment can be less than accrued interest (in other words, it

allows for negative amortization)

Any unpaid interest that accrues on your federal subsidized loan debt

will continue to be subsidized (paid by the government) for the first 36

months of IBR

When using IBR, the repayment period can extend beyond 10 years

regardless of the amount of your eligible debt

Any outstanding eligible loan balance is cancelled after 25 years of

being economically challenged

You are economically challenged during any month when one of the

following three situations is true:

(1) you made a payment using IBR,

(2) the amount of your monthly payment was at least equal to the

amount that would have been required under the Standard

Repayment Plan at the time you entered IBR, or

(3) you were in an Economic Hardship deferment.


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Loan PrepaymentWhen considering the length of repayment, remember that you have the right to prepay

any of your student loans without penalty. In other words, you can pay more than the

required minimum payment on a loan at any time or make a loan payment when one is

not required (during the grace period, for example). By doing so, youll save the interest

that would have accrued on that amount if you had not made the prepayment.

When prepaying a loan, you should:

Prepay the highest-cost loan first. When you have a choice of which loans to

prepay, you generally should first direct the money to the loans with the

highest interest rates. This usually means private loans first, followed by your

federal student loan debt.

Contact your loan servicer before you make the first prepayment to find out

where to send it and what instructions you need to provide so that it will be

processed according to your wishes.

Borrower BenefitsSave where you can! Your loan holder may offer either an interest rate reduction or a

principal reduction for certain repayment activities. The most common benefit offered is

for auto-debit payments (this is when you authorize your loan servicer to automatically

debit your monthly loan payment from a checking or savings account). These benefits

typically do not depend on the repayment plan you choose. Take advantage of the

benefits offered by your loan holder. Contact them for more information.

Ive contacted my loan holder andI qualify for these Borrower Benefits:


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__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________


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Federal Loan Consolidation

You can refinance your eligible federal student loans via federal loan consolidation. A

Federal Consolidation Loan is a federally guaranteed education loan that you can borrow

to pay off some or all of your existing federal student loans that are in their grace period

or are in repayment. This refinancing option is primarily beneficial to those borrowerswho have student loan debt that currently has a variable interest rate, those who have

multiple loan holders of their current federal student loans and want to have a single

loan to repay each month, or for borrowers who are hoping to qualify for Public Service

Loan Forgiveness and currently have loans in the FFEL Program. The Federal

Consolidation Loan has a fixed interest rate that is equal to the weighted average of the

interest rates of the loans being consolidated, rounded up to the nearest 1/8th percent,

capped at 8.25%. These loans have a repayment period of up to 30 years, depending on

your total student loan debt (which includes any of your outstanding private/institutional

student loans).

Consolidating your eligible federal student loan debt usually will cause you to lose anyborrower benefits that may be offered by the current holder of your loans and may result

in a higher interest rate on that debt. You also may lose other benefits by consolidating

your loan(s). For more information about federal loan consolidation, go to the U.S.

Department of Education website for consolidation at loanconsolidation.ed.gov.

Special Direct Consolidation Loans

This is a short term consolidation program available from January 2012 June 2012.

Only certain borrowers are eligible for this program. Federal Direct Loan servicers are

contacting eligible borrowers. For more information contact your servicer.

Identifying Your Financial GoalsHow well you manage your student loans and other personal finances will influence how

quickly you achieve your financial goals. Its important to set realistic goals, keeping in

mind all of your financial responsibilities, and to think both about the short-term and the

long-term when identifying your financial goals. Be honest with yourself about your goals

and your habits. Ask yourself the questions on the next page to get a good sense of

your financial situation as it is and as you hope for it to be.


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Activity Assessing Financial Goals and HabitsGoals

What is your most immediate financial need? ______________________________

Where do you intend to live, and whats the average

cost of living there? _____________________________________________________

Do you need or want to buy a new car? ____________________________________

What kind of career trajectory do you hope for/anticipate? ___________________

When do you want to buy a house? _______________________________________

Do you have or intend to have a family? When? How large? __________________

Do you want the flexibility to invest or reinvest in an

entrepreneurial endeavor? _______________________________________________

When do you hope to retire? _____________________________________________

What lifestyle do you hope to have in retirement? ___________________________

What will it cost for you to achieve your goals? _____________________________

Habits

How do you distinguish between what you need and what

you want? ___________________________________________________________

Are you a spender or a saver? ________________________________________

How many credit cards do you have? ______________________________________Do you pay your credit card bill(s) in full every month? _______________________

If not, do you pay more than the minimum monthly payment every month? _________

How many nights a week do you typically dine out? __________________________

When, where and how often do you hope to travel for recreation? ______________

Are your hobbies expensive? _____________________________________________

What will it cost to satisfy your habits? ____________________________________

Use the answers to these questions to help you form a strategy to manage repaying

your student loans within the context of your spending plan and the repayment plans

that are available. Your ability to repay your student loans is directly tied to your lifestyle

and financial habits. If your answers above indicate youll need more cash in hand, youll

need a way to stretch your resources. Thats why its good to keep in mind that choosing

a repayment plan that requires a smaller payment each month gives you the flexibility to

use the surplus funds to pay for other things that may be important to you.


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18

If financial flexibility will help you reach your goals, then either the Extended Repayment

Plan or the Income-Based Repayment (IBR) Plan may be the right option for you. Of

course, lower payments also come at the cost of more interest paid over the entire

repayment period, so its important to weigh the benefits of doing so. Regardless of the

repayment plan you choose, its important to develop a monthly spending plan and stickto it. Be smart with your money. And remember, you always have the option to pay more

on your student loan debt during those months you have the money to do so, regardless

of the repayment plan you choose.

Establishing Your Spending Plan

Your Financial Road Map

Your personal spending plan is like a road map. It tells you who you are financially, where

you are currently, and where you want to be.

A personal spending plan is an important component of any financial strategy. In fact,

the first step that a financial planner typically would take in advising you about your

investments and finances is to help you develop a comprehensive personal spending

plan. Taking time to carefully estimate your income and track your expenses will help you

determine which repayment plan is best for you.

There are four basic steps involved in developing your spending plan once you know your

financial goals:

1. Calculate your monthly income and other financial resources

2. Estimate your expenses including savings and investment needs3. Do the math (subtract your expenses from your resources)

4. Make adjustments as necessary to eliminate any surplus or deficit

You can use the spending plan worksheet on the next page to help get you started.

It also will help you determine what you can afford to pay each month on your student

loan debt.


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Where Are You Headed?

Where is the next stage of your life taking you? Its important to have a handle on what

you can reasonably expect for a starting salary and to understand the typical increases

that come with each level of experience. If you dont already know your starting salary,

there are some general websites that provide estimates for entry-level salaries across abroad range of professions, including:

Salary.com

Monster.com

Jobweb.com

Payscale.com

Careerbuilder.com

There are also websites geared more toward specific professions:

Dentistry adea.org

ada.org

Law

abanet.org

nalp.org

equaljusticeworks.org

careers.findlaw.com

lawjobs.com

legalemploy.com

Medicine

aamc.org

ama-assn.org

physicianrecruiting.com

healthjobusa.com


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Check out thespending planner

tools atAccessGroup.Org/

Calculators


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20

Remember, your spending plan needs to balance income must equal all your

expenses including your investment and savings needs. You dont want a surplus or a

deficit. If you have a surplus, you have funds to allocate (perhaps paying off debt more

quickly and/or investing more for the future). On the other hand, if you have a deficit, you

need to find a way to eliminate it.

Activity _Your Out-of-School Spending Plan Worksheet

Household Income (after taxes)

Your Monthly Salar y/Wages ____________Spouses Monthly Salary/Wages ____________

Other Monthly Income ____________

Total Monthly Income ____________

Student Loan Payments (per month)

Your Student Loan Payments ____________

Spouses Student Loan Payments ____________

Total Monthly Loan Payments ____________

Living Expenses (per month)

Housing

Rent or Mortgage ____________

Utilities

Electric/Gas/Oil/Water/Sewer ____________

Telephone ____________

Cable ____________

Internet Service ____________

Other ____________

Food

Groceries ____________

Dining Out ____________

Other ____________

Transportation

Car Payment ____________

Car Maintenance/Repair ____________

Gas for Car ____________

Parking ____________

Public Transportation ____________

Taxis ____________

Other ____________

Insurance

Auto ____________

Medical/Dental ____________

Disability ____________

Home/Apartment ____________

Life ____________

Other ____________

Other Living Expenses

Clothing ____________Dry Cleaning ____________

Laundry ____________

Personal Care (Hair Cuts, Cosmetics, etc.) ____________

Recreation ____________

Entertainment ____________

Subscriptions ____________

Books ____________

Music ____________

Household Goods/Furnishings ____________

Gifts/Donations ____________

Credit Card Payments ____________

_______________________ ____________

_______________________ ____________

Other Loan Payments ____________

_______________________ ____________

_______________________ ____________

Dependent Care Expenses ____________

Travel/Vacation ____________

Other Expenses ____________

Total Living Expenses per Month ____________

Investments/Savings

Retirement Contributions ____________

Childrens Education ____________

Savings ____________

Other ____________

Total Investments per Month ____________

Total Spending Plan Summary

Monthly

Tota l Monthly Income ______________

Total Monthly Loan Payments ______________

Total Living Expenses/Month ______________

Total Investments/Month ______________

Balance = ______________


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Eliminating a Spending Plan Deficit

What can you do?

If you have a spending plan deficit once youve done the math, you need to spend less

(or earn more) each month; there is no more financial aid once youre out of school.

If you dont eliminate the deficit, your total debt will only increase.

You can:

Reduce the spending on your lifestyle.

Is this realistic? You may consider your lifestyle to be bare bones already.

Reduce your investment/savings contributions.

Doing so may make it more difficult to achieve your short- and long-term

financial goals.

Reduce the amount you pay each month on student loans by switching to

a different repayment plan.

Picking the Repayment Plan

Thats Best for YouOnce youve identified your financial goals and worked out your personal spending plan,

its time to ask what you can afford to pay each month and which repayment plan fits

your habits and meets your goals.

One way to put your student loan debt in perspective is to consider that a basic tenet of

personal finance and the American lifestyle is that consumers should always match thelife expectancy of an asset with the attending liability associated with that asset.

For example, its reasonable to extend the term of a mortgage to 30 years because its

expected that a home will outlast the debt. Conversely, one would not extend the loan

term of a car to 30 years because youd likely still be repaying that debt long after the

car no longer worked. A five- to seven-year term on an auto loan is more reasonable

given the current life span of most automobiles.

Although the debt you incurred to acquire an education is more difficult to quantify,

education provides benefits throughout a lifetime at least a professional lifetime. And

that can be expected to last at least 30 to 40 years following graduation. As such,

repayment of education debt can be viewed as being more akin to that of the mortgageon a home. Therefore, it may not be unreasonable for a borrower to consider taking 25

to 30 years to repay that debt if he or she so chooses.


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Below is an example of how extending repayment beyond the Standard Repayment

Plans 10-year term may be beneficial in managing your student loans. It demonstrates

how you can increase your monthly cash flow for other purposes.

Affordable Monthly Loan PaymentStudent loan indebtedness is growing faster than average starting salaries for many

graduates. As such, many borrowers may find repaying their student loan debt

unaffordable using the Standard Repayment Plan. Although this plan results in the

lowest amount of interest paid, it also requires the highest initial monthly loan payment:

a payment that many borrowers may not be able to afford given their other monthly living

expenses/needs. Extending repayment to 25 years using the Extended Repayment Plan

can reduce the monthly payment by as much as 40% or more on Federal Stafford Loans

or Federal Direct Subsidized and Unsubsidized Loans having a fixed interest rate of

6.8%, as demonstrated in the chart below. The reduction in monthly payment could be

even larger, at least initially, using the IBR plan, depending on your households adjusted

gross income and household size.

For example, a borrower owing $60,000 in Federal Stafford Loans or Federal Direct

Subsidized and Unsubsidized Loans would be required to pay $690.48 per month for

10 years using the Standard Repayment Plan (see shaded line in chart shown above).

The minimum monthly loan payment would be reduced to $416.44 using the Extended

Repayment Plan over 25 years. This is a decrease of $274.04 per month and might

mean the difference between this borrower being able to afford his or her basic living

expenses or not, being able to live alone versus having to live with a roommate, paying

for gas and other utilities or not, or paying for health insurance or being uninsured.

$10,000 $115.08 $69.41 $45.67 40%

$25,000 $287.70 $173.52 $114.18 40%

$50,000 $575.40 $347.04 $228.37 40%

$60,000 $690.48 $416.44 $274.04 40%

$75,000 $863.10 $520.55 $342.55 40%

$100,000 $1,150.80 $694.07 $456.73 40%

$125,000 $1,438.50 $867.59 $570.91 40%

$150,000 $1,726.20 $1,041.11 $685.10 40%

$175,000 $2,013.91 $1,214.63 $799.28 40%

$200,000 $2,301.61 $1,388.14 $913.46 40%

Loan Principal

Standard Plan

10 Years

Extended Plan

25 Years Difference ($) Difference (%)

Monthly Payment

6.80%

Federal Stafford Loan, Federal Direct Subsidized Loanand/or Federal Direct Unsubsidized Loan


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In general, extending repayment of a loan will increase the amount of interest paid on

that debt. And on the face of it, paying more interest would appear to be a negative

financial outcome. However, the increase in interest paid does not necessarily mean an

equal loss of purchasing power over time due to the time value of money. Over time, the

purchasing power of a dollar declines due to inflation. The higher the rate of inflation,the faster that rate of decline. In fact, if the rate of inflation is high enough, the loss of

purchasing power may actually be less for a stream of payments made over a longer

period of time than when the rate of inflation is low, even if more total interest is paid.

Ability to Invest

You also may benefit financially by choosing Extended Repayment even though you could

afford to make payments under the Standard 10-year fixed plan. With lower monthly

payments under the Extended Repayment plan, you would have more money for

investments, such as the purchase of a home or investing in a tax-deferred retirement

account. With the purchase of a home (assuming you could not otherwise afford this

purchase without the added cash flow created by extending repayment), you likely couldreduce your federal income tax liability because the mortgage interest could be itemized

as a tax deduction. The home also represents an asset that hopefully would gain in

value over time.


23

Payments 1 120(First 10 Years)

Standard Repayment Plan Extended Repayment Plan

Total months in repayment 120 300

Total loan amount owed $60,000 $60,000

Loan interest rate 6.8% 6.8%

Monthly loan payment $690 $416

Monthly investment

contribution $0 $274

Annual rate of return on

investment 8% 8%

Total assets earned at

end of 120 months $0 $43,136

Payments 121 300(Years 10 25)

Monthly loan payment $0 $416

Monthly investmentcontribution $690 $274

Total assets earned at

end of 300 months @ 8% $212,536 $237,461

Total cash flow out

($690 x 300 months) $207,000 $207,000

Net gain $5,536 $37,461

Net benefit of Extended

Repayment Plan $31,925


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Federal Student Loan Debt $60,000 $100,000 $150,000

In the case of investing for retirement, you would be better off financially extending loan

repayment over 25 years as long as the average annual rate of return on the retirement

account was greater than the interest rate of the loans being repaid more slowly using

Extended Repayment. The example shown on the previous page illustrates the potential

financial benefit of choosing the Extended Repayment plan over the Standard 10-yearplan in repaying your eligible federal loans (with a fixed interest rate of 6.8%) and

investing the difference in monthly loan payments required under the two plans.

As the example illustrates, youd have $31,925 more in assets (in 25 years) if you used

the Extended plan and the $274 difference in monthly loan payments was invested

every month from the beginning of loan repayment. Had you paid off the $60,000 loan

debt using the Standard plan, youd be debt-free sooner, but would have less invested for

the future. The option thats best for you will depend on your financial goals and what

you can afford to pay each month.

The following chart provides an example of what your estimated monthly payments

would be under the Standard 10-year, Extended (fixed), and IBR plans.

Monthly Payment Comparisons

You should create your own version of the spreadsheet illustrated above to help you

decide which repayment plan will work best for you.

IBR RepaymentFixed payment @ 6.8% up to 25 yrs.

Adjusted gross income = $60,000,

Household size = 1 in 2012 $541 $541 $541

Standard Repayment

Fixed payment @ 6.8% for 10 yrs. $690 $1,151 $1,726

Extended Repayment

Fixed payment @ 6.8% for 25 yrs. $416 $694 $1,041


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Activity Comparing PaymentsThe following activity provides a sample worksheet you can use to compare your monthly

loan payments based on the various repayment plans.


25

Monthly Loan Payment

Standard Graduated Extended Income- Income- Income-

Loan Type Repayment Repayment Repayment Sensitive Based Contingent

Plan* Plan* Plan* Repayment Repayment Repayment

(fixed payment option) Plan** Plan* Plan***

Stafford $ $ $ $ $ $$

Grad PLUS $ $ $ $ $ $$

Other $ $ $ $ $ $

$Other $ $ $ $ $ $

$

TOTAL $ $ $ $ $ $

Monthly

Payment

Repayment

Period years years years years years years

TOTAL $ $ $ $ $ $

Interest Paid

TOTAL $ $ $ $ $ $

Paid

___________________________________________________________

___________________________________________________________

The best repayment plan for me is:

Repayment options available for:

*Federal Family Education Loan Program or Federal Direct Loan Program

**Federal Family Education Loan Program only

***Federal Direct Loan Program only


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26

Understanding Your Rights

and ResponsibilitiesAs a borrower, you have both rights and responsibilities. Among them are the

responsibility to repay your loan and the right to postpone repayment, if needed. Thefollowing section explores this topic more fully, beginning with deferment and

forbearance.

Deferment and Forbearance

There are circumstances for which you can request smaller payments or even a

temporary cessation of payments. For instance, you may be in a medical residency or

perhaps you are suddenly unemployed; in cases such as those, you may be granted

either a deferment or forbearance.

Federal Loan Deferment

A deferment is a temporary period during which no payments are made. While you are in

deferment, the government pays the interest on your Federal Subsidized Stafford Loans

and/or your Federal Direct Subsidized Loans, but interest accrues on your Federal

Unsubsidized Stafford Loans, your Federal Direct Unsubsidized Loans and your Federal

PLUS Loans. However, you do not have to pay the interest while in deferment; you can

allow the accrued interest to be capitalized (added to the principal balance of your loan)

when you leave deferment. The time period during which a loan is in a federal deferment

extends the repayment period by the number of months in deferment.

The following five types of deferments are available for individuals who first borrowed a

FFEL Program loan on or after July 1, 1993. More details on each is provided followingthe listing.

Education-Related Military Service

Economic Hardship Post-Active Duty

Unemployment

Contact your loan servicer to apply fora deferment or forbearance.


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Education-Related Deferments

Graduate Fellowship Deferment This deferment covers study under an

eligible graduate fellowship program. You must provide a written statement

from an authorized official in the fellowship program. This statement must

indicate your anticipated completion date in the program and certify, amongother points, that you will be engaged in full-time study.

In-School Deferment This deferment covers both full-time and half-time

study at a school eligible to participate in a Title IV program. Deferment is

granted through the anticipated graduation date. To qualify for an In-School

Deferment, you must be one of the following:

Enrolled at least half-time and you dont have an outstanding balance on a

FFEL Program loan disbursed before July 1, 1987.

Enrolled as a full-time student and you have an outstanding balance from a

FFEL Program loan disbursed before July 1, 1987.

Parent PLUS Loan Deferment Effective October 1, 2007, parentborrowers can request to defer repayment on Parent PLUS loans until sixmonths after their child fails to carryat least one-half the normal full-time course load.

Grad PLUS Loan Deferment and Forbearance Although Grad PLUS Loans

enter repayment as soon as they are fully disbursed, your loan servicermayautomatically place your Grad PLUS Loan in an In-School Defermentprovided you are enrolled at least half-time in an eligible program ofstudy. This will allow you to postpone repayment of the Grad PLUS Loan

while you are enrolled in school at least half-time. Once your enrollmentstatus drops below half-time status, youmay be eligible to receive a

deferment or forbearance on your Grad PLUS Loan(s) if you need tocontinue to postpone repayment. Grad PLUS Loans first disbursed on or

after July1, 2008, are eligible for an automatic 6-month post-enrollment deferment. You must contact your loan servicer to opt-out ofthis automatic deferment. For Grad PLUS Loans first disbursed prior to

July1, 2008, you may request a forbearance that allows you topostpone repayment for six months. The post-enrollment deferment andforbearance options allow you to begin repaying your Grad PLUS Loan(s)at the same time as your Federal Stafford Loan(s).

Rehabilitation Training Program Deferment This deferment coversparticipation in a rehabilitation training program. To qualify, you must

provide written certification from a recognized rehabilitation agency thatyou are receiving (or are scheduled to receive) rehabilitation trainingservices and that the training program will, among other things, require asubstantial commitment of time and effort that would normallypreventyou from engaging in full-time employment.


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Economic Hardship Deferment

This deferment allows borrowers to defer payments on their federal loans for up to one

year at a time for up to three years. Eligibility typically is based on your households

adjusted gross income, household size, and the poverty guideline for your household

size and state of residence. You may be required to provide verification of your AGI andhousehold size.

Unemployment Deferment

This deferment is available if you are conscientiously seeking, but are unable to find, full-

time employment in the U.S. defined as at least 30 hours/week for at least three

months. You are eligible for this deferment regardless of whether you were previously

employed and regardless of the circumstances under which any prior employment

ended. However, you are not eligible if youre unwilling to consider positions for which

you feel overqualified. If you obtain an unemployment deferment, you are expected to

notify your lender promptly when you obtain full-time employment. An unemployment

deferment can be granted in periods of six months each, with a three-year maximum.

Military Service Deferment

The deferment applies only to periods during which you are serving on active duty or

performing qualifying National Guard duty during a war, other military operation or

national emergency. As a result, not all active duty military personnel are eligible.

Effective October 1, 2007 the military service deferment is available for most federal

loans. The deferment is also extended for 180 days following demobilization. This

deferment must be granted on each individual eligible loan.

Documentation establishing eligible active duty service may include a copy of yourmilitary orders or a written statement from your commanding officer or personnel officer

that you are serving on active duty.

Post-Active Duty Student Deferment

As of October 1, 2007, this deferment is allowed for the 13-month period after

completing military service. Eligible are National Guard or other Armed Forces reserve

(current or retired) members called to active duty. Active duty is defined as full-time duty

in the active military service of the U.S., including State duty for members of the National

Guard. This does not include active duty for training or attendance at a service school.

Contact your loan servicer to determine whether you qualify for any of these defermentsand for information on how to apply for them. You may also refer to the U.S. Department

of Educations Student Aid on the Web atstudentaid.ed.govfor the most current

information available about all federal loan deferments. If you have an outstanding FFEL

Program loan prior to July 1, 1993 or if you are a FDL Program borrower with an

outstanding balance on a FFEL Program loan first disbursed before July 1, 1993, when

you received your first FDL Program loan you should contract your servicer to determine

whether or not you are eligible for additional deferments.


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Federal Loan Forbearance

Forbearance can help you meet your loan repayment obligations by

allowing a temporary cessation of payments, an extension of the time

available for making payments, or smaller payments than previously

scheduled. There are several types of forbearance on federal loans.Some types of forbearance are mandatory (such as for medical or

dental residency) and your loan servicer must apply the forbearance

upon your request, but others are granted at the loan servicers

discretion. Your loan servicer may grant a forbearance only if they

believe that you intend to repay your federal loans, but that you are

currently unable to make payments due to poor health or other

acceptable reasons. A forbearance can be given for up to one year at

a time. Contact your loan servicer for more information and to obtain

any needed forms to apply for a forbearance.

Loan Repayment Assistance and LoanForgiveness Programs

A portion of your eligible federal student loan(s) may be forgiven under

certain conditions based on your employment, school of attendance,

or jurisdiction where you live. For example:

Public Service Loan Forgiveness (PSLF) allows for loan cancellation on

Federal Direct Loans after 120 months of working full-time in an eligible

public service position (typically federal, state, local or tribal government

position or working for a 501(c)(3) non-profit organization) in which qualifying

monthly payments have been made using either IBR, ICR, or the monthly

amount paid must at least equal the amount required initially under theStandard 10-year Repayment Plan. FFEL Program borrowers are permitted to

consolidate their eligible federal student loans in the FDL Program to take

advantage of this program. Borrowers who believe they are working in an

eligible position should complete the PSLF Employer Certification Package.

Full-time teachers working for five consecutive complete academic years in a

qualifying elementary or secondary school serving students from low-income

families may be eligible for partial loan forgiveness. Contact your loan

holder/servicer for more information.

Also be aware that loan forgiveness and repayment assistance programs may be

available based on your income level and/or employment. One of more of the followingtypically sponsors these programs: the school you attended, your employer, or the state

in which you reside.

PSLF Employment Certification Packagecan be found here:

Department of Education:studentaid.ed.gov/publicservice


29

Will you be in amedical or dental residency?

If so, you may be eligible to

postpone loan repayment during

the entire residency period.

Contact your loan servicer

for more information.


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Tax Benefits Available to Borrowers

You may be eligible to deduct a portion of the student loan interest you pay on your

federal income tax return. Student loan interest is defined as the interest you paid

during the year on a qualified student loan. It includes both required and voluntary

interest payments. There is a maximum amount of interest paid each year that can bededucted and your eligibility for this deduction is based on your adjusted gross income

and that of your spouse, if married, and you file a joint federal tax return. Refer to IRS

Publication 970 for more detailed information about tax benefits for education or consult

a tax advisor.

Discharge of Your Loans

In most cases, Federal Stafford Loans, Federal Direct Subsidized and Unsubsidized

Loans and Federal PLUS Loans will be discharged in full if you die or become totally and

permanently disabled. In either case, documentation must be submitted to the loan

servicer. Discharge also will occur if: you cant complete your course of study becauseyour school closed, your school falsely certified your loan eligibility, or, effective July 1,

2006, if a loan was falsely certified in your name as a result of identity theft.

Discharge may not be available for private student loans youve borrowed. Check your

promissory note or contact the loan servicer for discharge provisions relative to other

loans you may have borrowed.


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Activity A Quick QuizDo You Know the Consequences of Default?(Circle the letter corresponding to the BEST answer)

1. Which of the following could occur if you default on your federal student loans?

a) The holder of your loan may declare the entire unpaid balance, including

interest, immediately due and payable

b) You could be required to pay all charges and other costs permitted by law

(including reasonable attorneys fees) for the collection of your loan

c) The holder of your loan and/or agency that guaranteed your loan may report thedefault to one or all three national authorized consumer reporting agencies

d) The holder of your loan and/or the federal government may take legal action

against you

e) The holder of your loan and/or agency that guaranteed your loan may report the

default to the school you attended when you received the loan

f) All of the above

2. Which of the following could also occur if you default on your federal

student loans?

a) You may be unable to receive future assistance from the federal student aidprograms, including PLUS Loans on behalf of your dependent children

b) You may become ineligible for various repayment options, deferments, and

other benefits

c) The holder of your loan may assign the promissory note to a guaranty agency,

at which time all amounts due will be payable to that agency

d) Your wages may be subject to garnishment

e) State and federal income tax refunds may be subject to IRS offset and withheld

by the federal government

f) All of the above


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Avoid Default!

The correct answers to the quiz on the previous page were: f) All of the above

in both cases.

Its important to remember that if youre late making a loan payment, it will be reportedto the national consumer reporting agencies and that information will remain on your

credit report for at least seven years. This will make borrowing money for other purposes

in the future difficult.

Default is avoidable. Taking the following steps will go a long way toward helping you

successfully repay your loans and avoid default:

Understand and comply with all terms and conditions of your loan(s).

Make certain that your loan payment(s) arrive at the loan servicer by

the due date.

Contact your loan servicer if:

youll have trouble making a payment by the due date;

your address, phone number or name changes;

your eligibility for a deferment or forbearance changes; or

anything else changes regarding your circumstances that affects repayment

of your student loans.

If you do default on a federal student loan, youll be subject to federal delinquent debt

collection procedures and possible litigation.

Keeping Good Financial RecordsAn important element of successful loan repayment is good record-keeping. Maintaining

accurate, well-organized records of your financial activities is an important part of

managing your loans and achieving your financial goals.


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Know Your Loans

Its important to know the following information about each loan youve borrowed:

Loan name (type)

Loan period (date borrowed/academic period) Original lender name, address and phone number

Guarantor name, address and phone number (if applicable)

Loan holder name, address and phone number (if different from

original lender)

Loan servicer name, address and phone number (if applicable)

Amount borrowed (including fees)

Interest rate

Monthly loan payment amount

Length ofrepayment period First scheduled loan payment due date

Final estimated loan payment date

Estimate of total finance charges

Set Up Your Record-Keeping System

Develop a system that will work for you. There are many books and software products on

personal finance to guide you in setting up a successful record- keeping system. You can

use individual file folders, portfolios, three-ring binders, manila envelopes, etc. Whatever

system you choose, however, remember the three Ss. Your system should be:

Simple make it simple to use

Sustainable make it a system youll maintain over the long term

Secure your records need to be safe from loss or damage dueto fire or theft

Documents to Keep

Keep copies of the following loan-related documents as part of your financial records:

Master Promissory Note

Disclosure statements

Notifications of loan transfer (lender change) and/or change in servicer

Repayment schedule

Lender/loan holder/servicer correspondence (including e-mails)

Deferment/forbearance requests


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Check out theLoan Ledger atAccessGroup.Org.It may be a usefultool for keepingtrack of yourloans.


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34

Where to Find Information About Your Federal Loans

You can obtain information about most of your federal student loans from the National

Student Loan Data System (NSLDS) at:

Toll-free telephone: 800-4FEDAID (1-800-433-3243) Website: www.nslds.ed.gov

Summary

Got all that?

Weve covered a lot of information, but youre going to be better for it. To review, we

worked on six key elements that can go a long way in helping you to select the best

repayment plan for your financial situation:

1.Understanding the repayment terms of your federal loans

2. Identifying your short- and long-term goals

3. Establishing your personal spending plan

4. Picking the repayment plan thats right for you

5.Understanding your rights and responsibilities as a borrower

6.Keeping good financial records

Be sure to consider all of your financial and life responsibilities when choosing the

repayment plan that works best. Remember to think about your short- and long-term

goals, and dont forget the little things like staying on top of your monthly spending plan.Student loan repayment doesnt have to be overwhelming. Mix in some discipline with

good planning and youll be ahead of the game.

Now get out there and go after your dreams.


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Office of the Ombudsman

U.S. Department of EducationThis office acts as a mediator between you (the borrower) and the lender/loan

holder/servicer to settle disputes that arise regarding your loans. For assistance or formore information:

Visit: www.ombudsman.ed.gov

Call: 877-557-2575 (toll-free)

Fax: 202-275-0549

Write to:

U.S. Department of Education

FSA Ombudsman

830 First Street, NE, Fourth FloorWashington, DC 20202-5144

Tips for Managing Loan Repayment Plan for repayment.

Understand your loans.

Organize and maintain good loan records.

Develop and follow an affordable spending plan.

Select the repayment plan thats best for you.

Make your loan payments by the due date. Contact your loan servicer immediately if youre having trouble

making a payment.

Request deferments or forbearance as needed.

Read all mail from your loan holder/servicer.

Promptly report changes in name, address, phone number or eligibility

for deferment/forbearance.

Consume with cash, not credit cards.

Identify your financial goals and review/revise them as your

circumstances change.

Save something (even if only $20) every month for emergencies.

Pay all your bills on time every month.

Limit the number of credit cards you have.

Pay credit card balances in full every month. Charge only what you know you

can afford to repay when the bill arrives.


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Terms You Should Know

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Terms You Should KnowAccrued Interest Interest that accumulates on a loan and is payable by you or, in the case of federal subsidized loans, by

the federal government during in-school, grace and approved deferment periods.

Amortization Paying a loan over time through periodic payments calculated to pay off the debt at the end of a fixed period,including accrued interest.

Annual Percentage Rate (APR) A percentage calculation that reflects the total cost of a loan (interest plus all fees) on an

annual basis.

Capitalization The process of adding accrued interest and/or fees to the principal balance of a loan. Interest then accrues

on the new principal balance.

Consumer Reporting Agency An agency that compiles, maintains and distributes credit and personal information to

authorized parties. This information may include your payment habits, number of credit accounts, balances of those accounts,

place of employment, length of employment, and records of credit transactions. Lenders check with consumer reporting

agencies to learn whether a potential customer seeking a loan is likely to repay, based on the way other obligations have been

handled in the past.

Credit Report A summary of your credit history. It is maintained by an authorized consumer reporting agency and sent to

authorized parties, when requested. Credit reports include information such as current and recent addresses, employer

information, payment performance for at least the past seven years, type of debt you have and the lending institution for each

account, available credit and current balances.

Credit Scoring A quick and consistent method of determining the likelihood that you will repay a future debt on time. It is

an evaluation tool that predicts how well you will manage credit, relative to other borrowers, based on your past credit

performance. Some of the factors used to calculate your credit score include promptness in paying bills, the amount owed on

accounts, the percent utilization of your available credit card limit, the age of your accounts and the frequency of new accounts

opened in the past 12 months.

Default The failure to repay a loan as agreed or to meet other terms of the promissory note. Default will negativelyaffect your credit rating.

Deferment A period during which the repayment of the principal amount of the loan is suspended as a result of your

meeting one of the requirements established by law and/or contained in the promissory note. During this period, you may or

may not have to pay interest on the loan.

Deferred Interest Accrued interest that you do not have to pay until a later date. Such deferred (accrued) interest may be

capitalized.

Delinquency A period that begins on the day after the due date of a payment when you fail to make the equivalent of one

full payment.

Disclosure Statement A statement of the actual loan costs, including the interest rate and any additional fees, which is

presented to you at the time the loan is made (see also, Repayment Disclosure Statement).

Exit Counseling A mandatory session for federal student loan borrowers where information is presented prior to graduation

or following a drop in enrollment status to less than half time. Information presented includes loan repayment and debt

management strategies.

Extended Repayment A loan repayment option that allows you to repay your loans over a maximum of 25 years, with either

equal or graduated payments. Available only to those who first borrowed federal loans on or after October 7, 1998, and have a

total eligible federal loan debt exceeding $30,000.


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Federal Consolidation Loan A federal loan program that allows most federal education loans to be refinanced into a single

new loan, often with a longer repayment term and, thereby, a lower monthly payment. This will also increase the total amount

of interest paid.

Federal Direct Loan There are two types, subsidized and unsubsidized Federal Direct Subsidized Loans are based on need,

and the interest is paid by the federal government. As of July 1, 2012, graduate and professional students are only eligible forunsubsidized loans which are not based on need, and begin accruing interest at disbursement.

Federal Direct PLUS Loan It is an unsubsidized federal education loan. Parents of undergraduate students can borrow the

PLUS loan on behalf of their undergraduate child, while graduate and professional students can borrow it themselves. An

amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year. There are no

aggregate borrowing limits in this program.

Federal Family Education Loan (FFEL) Program A federal program of education loans, including the Federal Stafford Loan,

the Federal PLUS Loan and the Federal Consolidation Loan. These loans are regulated and guaranteed by the U.S.

Department of Education but financed by private lenders/financial institutions.

Federal Perkins Loan A need-based federal student loan, which is issued and administered by a participating school.

Federal PLUS Loan The Federal PLUS Loan Program is an unsubsidized federal education loan that parents of dependent

undergraduate students can borrow on behalf of their undergraduate child. Effective for Federal PLUS Loans first disbursed on

or after July 1, 2006, graduate and professional students also are eligible borrowers.

An amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year.

The Federal PLUS Loan has a fixed interest rate of 8.5% for loans with a first disbursement on or after July 1, 2006 in the

FFEL Program. The Federal Direct PLUS Loan has a fixed interest rate of 7.9% for loans with a first disbursement on or after

July 1, 2006. There are no aggregate borrowing limits in this program. You cannot have adverse credit in order to borrow a

Federal PLUS Loan. If you do have adverse credit, you can provide an endorser who does not have adverse credit in an effort

to obtain the loan.

Federal Stafford Loan A federal education loan issued by a participating lender. There are two types, subsidized and

unsubsidized. Federal Subsidized Stafford Loans are based on need, and the interest is paid by the federal government while

you are in school, during the grace period and during approved deferment periods. Federal Unsubsidized Stafford Loans are

not based on need, and you are responsible for paying all the interest that accrues as soon as funds are disbursed.

Financial Aid Office The office at your school that determines eligibility for financial aid (including federal student loans)

based on federal formulas and cost-of-attendance figures. The schools financial aid administrators can provide information

about which lender to choose, how to apply for loans and getting loan requests certified. They also are a good resource for

information about other financial aid matters such as scholarships and work study programs.

Forbearance An agreement between the loan servicer and you to accept

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