Understanding Student Loan Repayment Plans, Slides of Corporate Law

Download Understanding Student Loan Repayment Plans and more Slides Corporate Law in PDF only on Docsity! Loan Repayment and Forgiveness Plans Docsity.com Agenda  Direct Loan and FFEL Repayment Plans  Other Repayment Strategies  Direct Loan and FFEL Discharges and Forgiveness  ED Services and Loan Servicing Tools  Appendix 2 Docsity.com Understanding Repayment Plans The Graduated Repayment Plan may be beneficial if the borrower’s income is low when they leave school but is likely to steadily increase. Under this plan, payments start out low and then increases every two years. The minimum payment equals the amount of interest that accrues monthly for up to the maximum repayment period. Like the Standard Plan, the maximum repayment period is 10 years for Subsidized, Unsubsidized, and PLUS Loans and 10-30 years for Consolidation Loans depending on the total loan indebtedness. 5 Docsity.com Understanding Repayment Plans Number of Monthly Payments under the Standard and Graduated Repayment Plans for Consolidation Loans based on the Total Student Loan Indebtedness Amounts 6 If the Total Education Indebtedness is Maximum Number of Monthly Payments At Least Less Than $7,500 $10,000 $20,000 $40,000 $60,000 $7,500 $10,000 $20,000 $40,000 $60,000 120 (10 years) 144 (12 years) 180 (15 years) 240 (20 years) 300 (25 years) 360 (30 years) Docsity.com Understanding Repayment Plans A borrower may choose this plan if they did not have an outstanding balance on a FFEL or Direct Loans as of October 7, 1998 or on the date they obtained a student loan after that date and have more than $30,000 in outstanding FFEL loans or more than $30,000 in outstanding Direct Loans. 7 For example… A borrower that has $35,000 in outstanding FFEL Program loans and $10,000 in outstanding Direct Loans can choose the Extended Plan for their FFEL loans, but not for their Direct Loans.  Borrower may choose to make fixed or graduated monthly payments  Minimum payment of $50 for Fixed Extended  Maximum repayment period is 25 years Docsity.com Understanding Repayment Plans  Borrower provides AGI or alternative income documentation annually to determine eligibility and calculate IBR payment amount – IBR payment amount may change  If multiple loan holders, borrower must apply to each and IBR payments pro-rated 10 Income-Based Repayment (IBR) Docsity.com Understanding Repayment Plans  If payment is less than accrued interest on subsidized loan (or subsidized portion of consolidation loan), the Department pays difference for up to 3 consecutive years from IBR repayment start date  If borrower no longer shows PFH, payment recalculated on 10- year standard repayment and unpaid interest capitalized 11 Income-Based Repayment (IBR) Docsity.com Understanding Repayment Plans Leaving IBR:  Borrower must repay outstanding balance under Standard Repayment plan (10-year standard or consolidation loan standard) with time in IBR counted in maximum repayment time  Any unpaid interest capitalized 12 Income-Based Repayment (IBR) Docsity.com Income-Sensitive Repayment (ISR) A FFEL-only repayment plan that is lender- specific and bases the scheduled monthly payment on borrower’s annual income. Payment amount increases or decreases based on income change. Maximum repayment period is 10 years (except on a consolidation loan) and borrower must reapply each year. Monthly payments may be increased for the remaining term of the loan to compensate if the borrower receives decreased payments under ISR. Understanding Repayment Plans 15 Docsity.com Alternative An alternative repayment plan is a Direct Loan-only plan that may be used when the terms and conditions of other repayment plans are not adequate to accommodate a borrower’s circumstances. The borrower must provide evidence of the exceptional circumstance and the terms must be within the following restrictions: • maximum 30-year term • minimum payment of $5.00 • payments cannot vary by more than 3x the smallest payment There are four different Direct Loan Alternative Repayment Plans: Alternative Fixed Payment, Alternative Fixed Term, Alternative Graduated and Alternative Negative Amortization Understanding Repayment Plans 16 Docsity.com Benefits of Consolidation: • One Lender and One Monthly Payment • Flexible Repayment Options • Lower Monthly Payments • It’s free Starting July 1, 2010, a borrower can consolidate their loans while still in-school until June 30, 2011. Reminder …. Borrowers will lose their grace period by consolidating while in an in-school status Other Repayment Strategies Loan Consolidation 17 Docsity.com Loan Discharges Discharge or cancellation is the release of a borrower from their obligations to repay their student loans. Closed School Unpaid Refund False Certification  School-based  Identity Theft Bankruptcy Total and Permanent Disability Death (including death of a dependent for parent PLUS loans) 20 Docsity.com Loan Forgiveness Borrowers may qualify to have all or a portion of their loan forgiven under the following forgiveness programs: 21  Teacher Loan Forgiveness  Public Service Loan Forgiveness  Service as Civil Legal Assistance Attorney  Service in Areas of National Need (no appropriations) Docsity.com Teacher Loan Forgiveness The Teacher Loan Forgiveness Program was established to encourage individuals to enter and remain in the teaching profession. This program grants loan forgiveness of up to $17,500 for teachers in certain specialties and up to $5,000 for other teachers after five consecutive years of teaching in certain low-income schools. The benefit is available to borrowers who did not have an outstanding balance on a FFEL or Direct Loan on October 1, 1998, or on the date they obtained a loan after October 1, 1998. 22 Docsity.com To take advantage of this benefit, borrower must have one of the following eligible loans:  Federal Direct Subsidized Stafford  Federal Direct Unsubsidized Stafford  Federal Direct PLUS Loan for parent and grad/professional students  Federal Direct Consolidation Borrowers may also consolidate their FFEL, Federal Perkins or certain Health Professions and Nursing Loans into the Direct Loan Program to qualify. Public Service Loan Forgiveness 25 Docsity.com Payments • The required 120 monthly payments must be made under any one or combination of the: ― Income-Contingent Repayment (ICR) Plan ― Income-Based Repayment (IBR) Plan ― 10-year Standard Repayment Plan ― Any other repayment plan if monthly payments equal at least the amount required under the 10-year Standard Repayment Plan Public Service Loan Forgiveness 26 Docsity.com Eligible public service includes:  Service in a position in AmeriCorps or the Peace Corps  Local, State, Federal or Tribal government position (excluding time served as a member of the U.S. Congress)  Employment, in any position, by any other public service organization Employment must meet the definition of “full-time”.  “Full-time” generally means the borrower is working an average of at least 30 hours per week or the number of hours the employer considers full-time Public Service Loan Forgiveness 27 Docsity.com  Provides benefits to borrowers on a first-come, first-served basis up to amount appropriated for the fiscal year by U.S. Congress  Borrower may receive up to $6,000 for each year, up to a total amount of $40,000 per borrower  Borrower signs Service Agreement with Secretary to perform qualifying service full-time for not less than three years for any benefits received (Same service cannot count for PSLF and repayment required if service not completed.)  Borrower must be employed by non-profit organization, protection and advocacy system, or client assistance program  Eligibility Criteria and Procedures contained in Federal Register Notice Published July 7, 2010  Application Deadline: August 16, 2010; FY 2010 funds fully committed 30 Civil Legal Assistance Attorney Docsity.com As of July 2010, the Department has five federal loan servicers. Our federal loan servicers are:  Direct Loan Servicing Center (ACS)  FedLoan Servicing (PHEAA)  Great Lakes Educational Loan Servicers, Inc.  Nelnet  Sallie Mae Corporation 31 ED Federal Loan Servicers Docsity.com To help ensure a successful repayment experience for the borrower, we provide tools to schools and borrowers and have servicers that provide interactive tools, loan calculators and counseling aids for use during all points in the loan life- cycle. These tools enable students and parents to access data, information, calculators, and customer service representatives. 32 Successful Repayment Docsity.com Our Servicers: • Educate and inform borrowers as to the tools and options available to assist them in the management of their student loans • Offer multiple repayment options tailored to borrower preferences (i.e. Online payments, ACH, check, etc.) • Provide self-service tools for borrowers and options for receiving bills and/or correspondence electronically • Offer dedicated services to schools to help manage cohort default rates 35 Borrower and School Services Docsity.com When borrowers become delinquent, the servicers make every effort to get them back on the “right road”.  Our call centers phone borrowers when they are most likely to be home  Have the ability to apply a forbearance over the phone  Interactive website  helps borrowers identify the best delinquency resolution option 36 Default Prevention Activities Docsity.com Our federal loan servicers have default reduction tools and efforts targeted to borrowers who are between 270 and 360 days delinquent. Some efforts include partnering with schools to assist with reaching borrowers at greatest risk to avoid default. More information on our delinquency prevention activities can be found on IFAP 37 Default Management Activities Docsity.com