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Federal Direct Exit Loan Counseling
Student Financial Services
Fall 2012
What is Exit Counseling and Why are You Here?
Exit counseling is a way for students to understand their rights and responsibilities.
Must be completed if you withdraw, graduate, or drop below half-time attendance.
Understand the agreement you entered when you borrowed your loans.
Objectives for Today
Review Federal Direct Student Loans
How many loans do I have and where are they?
Repayment Plans
What if I don’t pay? Consequences of default
When and how to get help from your servicers/lenders
Be successful and repay your loans.
Review Federal Student Loan Programs
Federal Student Loan Programs William D. Ford Direct Loan (Direct Loan) Program Loans:
< Direct Subsidized Loans< Direct Unsubsidized Loans< Direct Graduate PLUS Loans (for graduate/professional students)
Federal Family Education Loan Program (FFEL) Loans:< Subsidized Federal Stafford Loans< Unsubsidized Federal Stafford Loans< Federal Graduate PLUS Loans (for graduate/professional students)
Loan Definitions Loan:
The money borrowed from a lending institution or the Department that must be paid back.
Grace Period:The six-month grace period after you graduate, leave school, or drop below half-time enrollment in which you are not required to make payments towards your loans. Have you used your grace period?
Lender:The organization that made the loan initially for you which could be a bank, credit union, or the Department of Education.
Loan Definitions, Continued Loan Holder:
This is the institution that holds your loan and promissory note and has the right to collect money from you.
Loan Servicer:The company that maintains the loan for the lender. This organization will send bills, interest statements, disclosure statements, and any other necessary paperwork.
National Student Loan Data System (NSLDS):The Department of Education’s central location that contains information about your federal student loans.
Loan Definitions, Continued Deferment:
A deferment is a period of time during which your lender will temporarily suspend your regular payments.
Forbearance: If you are unable to make your scheduled payments, but do not meet the criteria to qualify for a deferment, the lender/loan holder may allow you to reduce the amount of your payment.
Collection Agency:Company that will make all attempts and/or litigation to recover defaulted student loans.
Loan Definitions, Continued
Master Promissory Note (MPN):MPN is the legal contract between you and the lender (Department of Education)
Your promise to repay the loans even if you do not complete your education or are otherwise unhappy with the education you have received.
Effective for loans from multiple years
Changing Relationships
To this point most of your contact regarding your Federal Student Loans has been with MSU (or a previous school).
Now most of your questions will be directed to the lender or loan servicer.
Subsidized Vs. Unsubsidized
Subsidized< Need-Based< No interest is
accruing while you are in school
Unsubsidized< Non Need-Based< Interest begins accruing
the day the loan is disbursed. The interest can be paid while you are going to school or capitalized
NOTE: Payment of principle for Subsidized and Unsubsidized begins six months after you have either graduated, dropped
below half time, or withdrew.
Different Loan = Different Terms
*Standard Repayment Plan. Other repayment plans are available.
My Loans
Check out the National Student Loan Data System for students (NSLDS)< www.nslds.ed.gov
Check your loan records
Check with your lender
Check with the financial aid office
Watch letters/emails from Loan Servicer, etc.
Check your credit report< www.annualcreditreport.com
National Student Loan Data System (NSLDS)
www.nslds.ed.gov< Need your Federal
PIN number< If you do not have
your Federal PIN, it can be obtained at www.pin.ed.gov
Repayment Plans
Paying on Your Loan
You have the option to prepay all or part of your federal student loans before your repayment begins (without penalty).
Make payments before they are due or pay a little more each month.
Contact loan servicer to make sure extra payment is applied to principal balance.
Paying extra each month can reduce total cost of loan over time.
Standard Repayment
Equal monthly payments
Payment term of 10 years
Minimum payment of at least $50 per month
•1An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan
Other Repayment Options Graduated Repayment Plan
Extended Repayment Plan
Income-Based Repayment Plan
Income-Sensitive Repayment Plan
Income Contingent Repayment Plan
Graduated Repayment Plan
Payments start out low and then will increase every two years
Payment term of 10 years
Loan Amount
Beginning
Monthly Payment
Ending Monthly Payment1
Total Interest
Paid
Total Paid2 (Loan + Interest)
$10,000
$56.67 $159.63 $4,726.70 $14,726.70
$30,000
$170.00 $478.88 $14,179.62
$44,179.62•1 Payment amounts under graduated plans vary from lender to lender. Your lender will determine the exact payments if you choose this plan.
•2 An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan.
Extended Repayment Plan Eligible if you received loans after 10/7/1998 and
have over $30,000 in federal student loan debt.
Repayment term may be as long as 25 years
Minimum payment is at least $50 per month
Monthly payments may be fixed or graduated
•1 An unsubsidized Stafford loan at 6.8% interest, with a 25-year amortized repayment plan.
Income- Based Repayment Plan
Monthly payment is capped at an amount that is affordable based on your income and family size
Must reapply each year
Payment term is 10-25 years
May qualify for cancellation for any outstanding balance on loans after 25 years
Income-Sensitive Repayment Plan
Repayment option available only to borrowers who have FFELP loans
Monthly payments are based on income and total loan amount
Repayment term is 10 years
Must reapply each year
Income-Contingent Repayment Plan Repayment option available only to borrowers
who have Federal Direct Loans
Monthly payments are based on income and family size
Repayment term is 25 years
Must reapply each year for this repayment plan
Unpaid portion may be discharged with possible tax liability
Loan Consolidation
One lender and one monthly payment
Flexible repayment options
Reduced monthly payments
Fixed interest rate
Subsidized, Unsubsidized, Graduate PLUS, and Perkins Loans are eligible for consolidation
Check with Lender for Private student loans
Loan Forgiveness Opportunities Public Service Loan Forgiveness
< Borrowers who hold a public service job may be eligible to have a portion of their Direct Loan debt forgiven after making 120 payments.
< Visit the following website for more information http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
Teacher Loan Forgiveness< Borrowers who teach in an elementary or secondary
school that is classified as low income might be eligible to have a portion of their student loan debt forgiven
Loan Servicers
Federal Loan Servicing (PHEAA)
Great Lakes Educational Loan Services Inc.
Nelnet
Sallie Mae
Department of Ed Student Loan Servicing (ACS)
Note: For a complete list of loan servicers, refer to the list that was sent to you in the mail by Student Financial Services.
What will my payments be?
Payments on Federal Direct Loans will be based on your actual Direct Loan debt level
The minimum payment on your Federal Direct Loan will depend on payment plan
What will my payments be?
Repayment charts were included with your Exit mailing.
Loan history at MSU and other MnSCU schools is included.
Use a loan calculator to estimate what your loan payment will be by going to http://www.finaid.org/calculators.
Loan Repayment Examples
Money-Saving Tips
Sign up to make your monthly payment via automatic debit (ACH) instead of by check
Pay on time
Tax Benefits for Education
A tax credit reduced the amount of income tax you may have to pay.< American Opportunity Credit< Hope Tax Credit< Lifetime learning Tax Credit
A deduction reduces the amount of your income that is subject to tax which then reduces the amount of tax you would have to pay.< College Tuition & Fees Deduction< Student Loan Interest Deduction
What If I don’t Pay?
The Consequences of Default
Consequences of Default
Ineligible for future financial aid
Difficulty in obtaining credit
Seizure of tax refunds, wages and/or property
Collection agency or other legal action
Loss of deferment or monthly payment options
Your entire loan balance will be due in full immediately
You may not be able to obtain a professional licensure or get hired by an employer who performs credit checks
Debt ManagementBudget (monthly)
Total Monthly IncomeRentStudent Loans
$2100$700$220
Electric $60
Heat $100
Cable/Phone/Internet $120
Food $500
Entertainment $150
Credit Card Payment $100
Transportation (car payment, gas, insurance)
$400
Savings $50
Total: -$300
Your Educational Loan Payments should be considered fixed expense like rent and food!
When and How to Get Help!
Contact your Lender/Servicer
Experience repayment difficulty
Need a deferment or forbearance
Change employer or employer address
Your Lender/Servicer Will Want to Help
If you are experiencing repayment difficulties there are things your Lender or Servicer can do to help you out.
< Deferment
< Forbearance
< Change your repayment plan
< Loan cancellation
Veteran’s Options
Recent legislative changes have created new options for Veterans.
Contact your lender or servicer to find out more information on these options that may be available to you as a Veteran.
Be Successful and Repay Your Loans
Resolving a Dispute or Problem
Contact your lender or servicer first
If unable to resolve with your loan holder, contact the Federal Student Aid (FSA) Ombudsman for assistance.
Phone number: (877) 557-2575
Studentaid.gov under “Repay Your Loans”
Borrower’s Rights and Responsibilities
Borrower Rights
Loan obligation information
Copy of Promissory Note
Original Paid-in-Full Notice
Interest rates/fees
Loan balance
Repayment schedule
Notification of Loan Servicer
Borrower Rights
Interest benefits
Grace period
Pre-payment without penalty
Deferment while in school
Request forbearance or deferment
Borrower Responsibilities
Complete Exit Loan Counseling at www.studentloans.gov
Repay loans even if you < Do not complete your education
< Are unhappy with the education you have received
< Can’t find employment
Borrower Responsibilities
Maintain contact with your lender/servicer< Notify your lender/servicer any time you change your address
< Anytime you change your phone number
< Change your name
< Cannot make a payment
Make monthly loan payments when the grace period has ended
Notify your lender/servicer of anything that might change your eligibility for an existing forbearance or deferment.
Personal Data
Information about your loans are given to the major credit reporting agencies.
To avoid telemarketing and mass mailings based on that information consider registering with the National do not call registry at < 1-888-382-1222 (TTY 1-866-290-4236) or
< https://www.donotcall.gov
Final Words
Your student loan debt is an investment in your future that no one can take away from you.
“If a man empties his purse
into his head, no man can
take it away from him.
An investment in
knowledge always
pays the best interest.”
Benjamin Franklin
Questions?