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NYPIRG PresentsNYPIRG Presents
Student Loans:Student Loans:A Student Empowerment Series Workshop A Student Empowerment Series Workshop
Student directed not-for-profit advocacy organization
Six issue-based campaigns◦ Among other things, NYPIRG chapter is a resource
which provides workshops addressing civic action, organizing, leadership, financial literacy, student housing/tenants rights and student loans
NYPIRG is…NYPIRG is…
Provide student loan debt history Review student loan types Explore payment plans Discuss options when money gets tight Identify loan forgiveness programs Discuss federal student loan legislation Free money? Free money!!
ObjectivesObjectives
Student loan debt is topping $1 trillion.
37 million Americans hold outstanding student loan debt◦2.7 million of those debt holders are New Yorkers
Nationally, the average amount of student loan debt for the Class of 2011 was $26,600. ◦New York graduates carrying student loan debt had an average debt of $27,310.
On this campus the average student graduating with debt owes…
Student Loan Debt HistoryStudent Loan Debt History
Among all bachelor's degree recipients, median debt was:◦ $7,960 at public four-year institutions◦ $17,040 at private not-for-profit four-year
institutions◦ 31,190 at for-profit institutions.
Pell Grant recipients are much more likely to borrow and to borrow higher sums
24,800 NYS borrowers defaulted on their student loans or were more than nine months delinquent on their payments between 2009 and 2012.
Recent federal student loan interest rate debates have brought more attention to the issue.
Student Loan Debt History, contStudent Loan Debt History, cont’’dd
Some students had to change lenders Investors are buying less loans Lenders are offering fewer “deals” Some colleges are switching from the
Federal Family Education Loan Program (FFELP) to the Federal Direct Student Loan Program (FDSLP)
Private loans are harder to get
How the Credit Crisis How the Credit Crisis isis Affecting Affecting Student LoansStudent Loans
Students can still get federal loans, regardless of their financial need
Interest rates and terms on all federal loans remain the same once you take them out
How the Credit Crisis How the Credit Crisis is is notnot Affecting Student Affecting Student
LoansLoans
Perkins LoanStafford Loan
PLUS LoanPrivate Loans
Types of Student LoansTypes of Student Loans
No credit check Loans for students with “exceptional need” For undergraduate and graduate students College acts as the lender Must submit FAFSA (Free Application for
Federal Student Aid) and complete a Perkings promissory note
Subsidized Loan forgiveness for certain occupations
Perkins Loan: BasicsPerkins Loan: Basics
5% interest rate No fees 10-year repayment period 9-month grace period
Perkins Loan: TermsPerkins Loan: Terms
Annual Perkins Loan Borrowing Limits
Undergrads Grads
$5,500 per year $8,000 per year
Aggregate Perkins Loan Borrowing Limits
UndergraduatesGraduate including
undergraduate loans
$27,500 $60,000
No credit check No income requirement For undergrad, grad/professional, med
students Subsidized and/or unsubsidized Borrow directly from federal government Must submit FAFSA Loan forgiveness for certain occupations
Stafford Loan: BasicsStafford Loan: Basics
Academic Year Subsidized Rates Unsubsidized Rates Graduate Rates
2011-12 3.40% 6.80% 6.80%
2012-13 3.40% 6.80% 6.80%
2013-14* 3.86% 3.86% 5.41%
Current Stafford Loan interest rates in effect from 07/01/2013 to 06/30/2014
*These rates have been updated to reflect the new student loan interest rate legislation that went into effect on August 9, 2013.
Stafford Loan Interest Stafford Loan Interest RatesRates
Interest rates this year are 3.86% 1% origination fee 10 years repayment period 6-month grace period
Stafford Loan: TermsStafford Loan: Terms
For parents and grad/professional students
Requires credit check Unsubsidized Borrow directly from U.S. Department of
Education Must submit a FASFA form, promissory
note and grads much complete counseling
PLUS Loan: BasicsPLUS Loan: Basics
PLUS Loan: TermsPLUS Loan: Terms Fixed 6.41% interest rate 4.2% fees Max loan amount is cost of attendance minus
other financial aid received Repayment begins 60 days after disbursement
◦ Can make interest only payments◦ Grad borrowers can defer while in school,
but must start paying back as soon as they leave (no grace period)
◦ Parents can defer while child is in school◦ Parents get a 6-month grace period
Offered by banks and other private lenders Not secured by the federal government May be more expensive, higher interest Subject to credit approval Often need a cosigner Marketed aggressively Harder to get in current economy
*Avoid private loans if you can
Private Loan: BasicsPrivate Loan: Basics
Private student loans tend to have worse terms than federally secured student loans
Federal Loans Private Loans
Interest Rates
Fixed RatesPerkins 5%Stafford 3.86%PLUS 6.41%
Variable RatesUp to 16.5%
FeesPerkins 0%Stafford 1%PLUS 4%
Often 6% or higher
Payment PlansStandard 10 year, extended, graduated, income-based
Vary from 10 to 30 years
Forgiveness Options
Many None
Deferment and Forbearance options
Standardized and established in federal law
Vary by lender and decided by the lender
Look it up in the National Student Loan Data System
Website: www.nslds.ed.gov Ask the financial aid office
Which loans do you have?Which loans do you have?
ConsolidationPayment Plans
DiscountsRecent Student Loan Debt-Relief
Managing Student Loan DebtManaging Student Loan Debt
Consolidation BasicsConsolidation Basics
Refinancing several student loans you have to pay off together.
Previous interest rates get averaged for new repayment rates.
*Federal Direct Loan Consolidation program www.loanconsolidation.ed.gov
What are Special Direct Consolidation Loans?
Who is eligible for a Special Direct Consolidation Loan?
What federal student loans are eligible for the Special Direct Consolidation Loan program?
Special Direct Consolidation LoansSpecial Direct Consolidation LoansOnly offered between January to June 2012Only offered between January to June 2012
Benefits◦ Interest rate reduction◦ Repayment term will not be changed◦ Credit for previous IBR Payments◦ Eligibility for loan forgiveness under the Public
Service Loan Forgiveness (PSLF) Program
Special Direct Consolidation LoansSpecial Direct Consolidation Loans
Traditional Direct Consolidation Loan
Special Direct Consolidation Loan
Repayment Term The repayment term for the loan starts over, giving students longer to repay their loan. A longer repayment term may result in lower monthly payments but will ultimately increase the amount the borrower will pay over the life of the loan since more interest will accrue during a longer repayment period.
Each loan that is consolidated retains its original repayment term. As a result, borrowers will pay less interest over the life of the loan than they would under the traditional consolidation program.
Interest Rate A fixed rate based on the weighted average of the interest rates of the loans being consolidated- rounded up to the nearest one-eighth of 1%, not to exceed 8.25%.
A fixed rate (not to exceed 8.25%) after applying the 0.25% interest rate reduction to the FFEL loans being consolidated.
Electronic Debit Benefit
Eligible for a 0.25% interest rate reduction if the loan is repaid through the Department’s automatic debit system.
Eligible for an additional 0.25% interest rate reduction if the loan is repaid through the Department’s automatic debit system.
How are Special Direct Consolidation Loans How are Special Direct Consolidation Loans different than traditional Direct different than traditional Direct
Consolidation Loans? Consolidation Loans?
ConsolidationBenefits
ConsolidationDrawbacks
Single monthly payment Pay more over the life of the loan
Often a smaller payment May cut short your grace period
Access to alternate payment plansPerkins borrowers lose some benefits
Borrowers with pre-2006 loans can switch from variable to fixed interest
FFELP Stafford or PLUS borrowers may lose “discounts”
FFELP PLUS borrowers save .25% interest
Resets the clock to apply for deferment and forbearance
Payment PlansPayment PlansStandard
GraduatedExtended
Payments Based on Income
Comparing Payment Plans
Payments Term Pro Con
Standard
Fixed payments, no less than $50
10 yearsLowest overall cost
Big monthly bill
Graduated
Start small, increases every 2 years
10 yearsVery affordableat start
Last payments are much larger than Standard plan
Extended
Fixed or graduated
25 yearsSmaller payments
Highest overall cost
Income Sensitive For FFELP borrowers Pay fixed percentage of monthly income Reapply every year Length of loan is 10 years
Income Based For FDLP and FFELP borrowers More generous formula determines monthly payments Enroll once Remaining balance forgiven after 25 years
Income Contingent For FDLP borrowers Formula determines monthly payments Enroll once Remaining balance forgiven after 25 years
Payment Plans Based on IncomePayment Plans Based on Income
What is income-based repayment? What federal student loans are eligible
to be repaid under an IBR plan? Who is eligible for IBR? How do borrowers apply for IBR?
Income-Based Repayment PlanIncome-Based Repayment Plan
What are the benefits of IBR?◦ Pay as you earn ◦ Interest payment benefit ◦ 25-year cancellation ◦ 10-year public service loan forgiveness
Income-Based Repayment PlanIncome-Based Repayment Plan
Comparing Payment Plan Costs for a $35,000 Loan at 6.0%
Plan TermInitial Monthly
Payment
Total Cost of Loan (Interest + Payments)
Standard – 10 years $ 388.57 $ 46,628.40
Graduated – 10 years $ 263.25 $ 48,882.37
Extended Fixed – 30 yearsGraduated -30 years
$ 225.51$ 175.00
$ 67,653.00$ 73,601.05
Income Contingent(Initial salary of $25,000) – 18 years*
$ 243.33 $ 57,903.45
Obama's Student Loan Debt-Relief Plan◦ Caps loan payment at 10% (from 15%) starting
July 12’◦ Forgives balances after 20 years (from 25 years)
Benefits◦ Pay as you earn and interest payment benefit◦ 20-Year balance forgiveness◦ 10-Year public service forgiveness
What it doesn’t cover◦ Anyone who took out loans before 2008 (who
won’t be taking out more loans starting now).◦ Purely private loans and defaulted loans◦ You may pay more interest
Recent Student Loan Debt-Recent Student Loan Debt-ReliefRelief
Stay Out of DefaultDeferment
ForbearanceOther Ways to Avoid Default
Income-Based Repayment Plan
When Student Loan DebtWhen Student Loan DebtSeems UnmanageableSeems Unmanageable
Delinquency Fall behind on payments Calls and notices from
lender Late fees Lender reports missed
payments to credit bureaus
Default 9 months of missed
payments Entire loan becomes due Lender uses “aggressive”
collections methods
Delinquency and DefaultDelinquency and Default
Collection agencies Lawsuits Paychecks may be garnished Income tax refunds seized Ineligible for state and federal aid Credit damaged Filing for bankruptcy will not effect a
loan in default
Effects of DefaultingEffects of Defaulting
Temporary break from payments for:◦ Enrolled college students◦ Unemployed borrowers◦ Borrowers facing economic hardship ◦ Peace Corps enrollees◦ Active military personnel
No interest accrues on subsidized loans
DefermentDeferment
For borrowers who don't qualify for a deferment but need a break
Lasts up to 12 months Renewed for up to 3 years You pay the interest
ForbearanceForbearance
Borrow as little as possible Income Based Payment Plans Get help making a budget
Other Ways to Avoid DefaultOther Ways to Avoid Default
Forgive all or part of your student loan Encourage high-needs or public-service
work Perkins loan has many such opportunities For detailed information go to:
http://www.finaid.org/loans/publicservice.phtml
Loan Forgiveness ProgramsLoan Forgiveness Programs
Student Loan Forgiveness Programs
Field Loan Benefit
Child Care Provider Stafford
20% forgiven after each of 1st & 2nd year, 30% after each of 3rd and 4th year
Law Enforcement or Corrections Officer
Perkins 100% forgiven
Nurse or Medical Technician
Perkins 100% forgiven
Teacher Level IStafford, Federal Consolidated Loans
Up to $5,000
NYS Licensed Social Worker
Stafford, Federal Consolidated Loans
$26,000
Public Service CareersFDLP Stafford, PLUS, Federal Consolidated Loans
100% Forgiven
Federal Student Aid, an office of the U.S. Department of Education, ensures that all eligible individuals can benefit from federally funded financial assistance for education beyond high school.
Tuition Assistance Program◦ A New York State funded grant program that helps pay the tuition of eligible full-
time and part-time students. If you receive a TAP award, the money comes directly to the college for payment of your tuition.
New York State Higher Education Services Corporation◦ http://www.hesc.com/content.nsf
Foundation Center◦ www.foundationcenter.org◦ CUNY CAPS (Counseling Assistantship Program)◦ http://www.cuny.edu/employment/student-jobs/jobs/counsel-assist-prog.html
SUNY Assistantships◦ Student receives a stipend and/or tuition scholarship; each SUNY school varies,
reach out to Financial Aid Office
Free Money? Free Money? Think Aid/Grants/Work Study FirstThink Aid/Grants/Work Study First
For Info & Research www.studentdebtalert.org www.projectonstudentdebt.org http://college-insight.org http://edlabor.house.gov http://studentaid.ed.gov/
PORTALSWebApp/students/english/specialconsolidation.jsp
http://studentaid.ed.gov/students/publications/student_guide/2010-2011/english/typesofFSA_loans_2.htm
http://www.theatlantic.com/business/archive/2011/10/who-qualifies-for-obamas-10-student-loan-payment-cap/247470/
http://www.csmonitor.com/USA/Politics/2011/1025/Obama-s-student-loan-debt-relief-plan-too-good-to-be-true
For Help with Your Loans
www.collegefinancecenter.org
www.studentaid.ed.gov www.finaid.org www.mappingyourfuture.org www.obudsman.ed.gov www.oag.state.ny.us www.nslds.ed.gov http://www.finaid.org/loans/
forgiveness.phtml
ResourcesResources