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Student Loans: Before, During, and After You Borrow March 30, 2010 PowerPoint PPT Presentation


Student Loans: Before, During, and After You Borrow March 30, 2010. Supplemental Materials for Entrance and Exit Loan Counseling CFI’s Default Aversion Activities Default Management Suggestions for College Campuses. This presentation supplements

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Student loans before during and after you borrow march 30 2010 l.jpg

Student Loans: Before, During, and After You BorrowMarch 30, 2010


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Supplemental Materials for Entrance and Exit Loan Counseling

CFI’s Default Aversion Activities

Default Management Suggestions for College Campuses


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This presentation supplements

Required entrance counseling that must be completed before borrowing a Federal Title IV loan

Required exit counseling that Federal Title IV loan borrowers must complete.

College Foundation, Inc. (CFI) appreciates the invitation from your school to assist your aid office in providing you information about student loans.


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Student Loan Basics

Loans have to be repaid. Borrow only what you need.

Interest

What you are charged for using someone else’s money

Capitalization

The addition of unpaid interest to the principal balance. Then new interest is applied to the ENTIRE balance (principal plus capitalized interest)


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Types of Student Loans

Federal Subsidized Stafford Loan

No interest is accruing while you are in school at least half-time and during grace period

Federal Unsubsidized Stafford Loan

Interest is accruing the entire time

Different interest rates as of 7/1/2008

Repayment begins 6 months after you are no longer enrolled at least half-time

Complete FAFSA and Master Promissory Note


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Types Of Student Loans

Federal Grad/Prof PLUS (GPLUS)

Graduate/professional students

Repayment can be deferred while in school

Federal Perkins Loan

Check with your campus financial aid office for more information about this loan


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Types of Student Loans

Federal Parent Loan (PLUS)

Borrowed by parent on behalf of a dependent undergraduate student

Alternative or Private Loans


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Your Master Promissory Note (MPN)

Contains your Rights and Responsibilities

Is a binding legal document that you signed

You indicated your commitment to repay your loans by signing the MPN

Your MPN may have been used for only one year at a time or as a multi-year note

Your MPN expires after 10 years or if you declare bankruptcy or for other reasons – check with your lender

Check with your lender if you have questions about your MPN


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Loan Limits For Dependent Students

Aggregate limit for undergraduate dependent students is $31,000 with no more than $23,000 in Subsidized Loans.


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Loan Limits For Independent Students Or Dependent Students Whose Parents Are Denied PLUS

Aggregate limit for undergraduate students is $57,500 with no more than $23,000 in Subsidized Loans.

Aggregate limit for graduate/professional students is $138,500 with no more than $65,000 in Subsidized Loans


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You Have to Repay Your Loan Even If

You did not complete your education

You are not employed

You did not find employment in your field of study

You feel the education you received did not meet your expectations


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Your Lender Can Sell Your Loan

Your lender can sell your loan to another lender or secondary market

The original lender and new holder of your loan must notify you in writing if a sale occurs. Notification includes new holder’s

Name

Address

Telephone number

Terms and conditions of your loan remain the same


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Student Loan Repayment Basics

Grace Period

Time during which you do not have to make any loan payments.

Deferment

Time during which loan payments are temporarily suspended

Forbearance

Temporary change in loan payment due to some financial hardship you are experiencing. You may still have to pay the interest that is accumulating during this time.


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Repayment Begins – Stafford Loan

6-month grace period

Begins the day after you stop attending on at least a half-time basis

Each loan has only one 6-month grace period.

Your lender advises you of your first payment due date during your grace period.

You are responsible for beginning repayment of your loan on time even if your lender’s communication fails to reach you.


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Repayment Begins - GradPLUS

Your GradPLUS loan enters repayment on the date the loan is fully disbursed, but you will have an in-school deferment while you are enrolled at least half-time.

Post Enrollment Deferment (sometimes referred to as a grace period) begins the day after you drop below half-time enrollment.

Your lender advises you of your first payment due date during your grace period.

You are responsible for beginning repayment of your loan on time even if your lender’s communication fails to reach you.


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Interest On Your Loans

Subsidized Stafford Loan

Government pays interest on your loan while you are in school, during authorized periods of deferment, and during grace period.

Unsubsidized Stafford Loan

Interest accrues from disbursement. You may make some payments while in school, during authorized periods of deferment, or during grace period.


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Interest on Your Loans

GradPLUS Loan

Interest accrued from disbursement. You may have made some payments while in school or during authorized periods of deferment or during post enrollment deferment (grace) period

Paying interest while you go saves money in the long term.


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Repayment Tips

Keep your loan records organized.

Keep copies of everything related to your loan.

Know how much your loan payments will be – your lender will send you a repayment schedule.

Create a monthly budget.

Check to see if your lender offers automatic draft for your payments.

Your lender will offer you the Standard Repayment Plan and will provide information about other repayment plans.


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Repayment Options

You always have the option to prepay your loan.

You can always pay your loan on a shorter schedule.

Repayment Schedules

Standard Repayment

Graduated Repayment

Income-Sensitive Repayment (FFEL)

Income-Contingent Repayment (Direct Loan)

Income-Based Repayment

Extended Repayment


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Standard Repayment Schedule

Minimum monthly payment is $50 – amount of monthly payment depends on how much borrowed; payment required may be higher than the minimum

Maximum repayment period is 10 years


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Graduated Repayment Schedule

Begins with lower payments

Payments increase over time

More interest will accrue over the life of the loan

Principal balance decreases at a slower rate


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Income-Sensitive Repayment (FFEL)

Adjusted payment amount based on gross income

Payment cannot be lower than monthly interest amount

Eligibility and payment amount verified annually

More interest will accrue over the life of the loan

Principal balance decreases at a slower rate


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Income-Contingent Repayment

Adjusted payment amount based on gross income

Payment cannot be lower than monthly interest amount

Eligibility and payment amount verified annually

More interest will accrue over the life of the loan

Principal balance decreases at a slower rate


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Income-Based Repayment

Available for payments made on or after July 1, 2009

Adjusted payment amount based on income and family size

Payment will not exceed 15% of amount by which your adjusted gross income (AGI) exceeds 150% of poverty line (based on your family size)

If monthly payment amount is not enough to pay the accrued interest, the Department of Education will pay the remaining interest for a period of 3 years


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Income-Based Repayment

Eligibility is re-evaluated annually

More interest may accrue over the life of the loan

Principal balance decreases at a slower rate

Any outstanding loan balance after 25 years will be forgiven

Amount forgiven may be taxable


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Extended Repayment

Available to new borrowers on or after October 7, 1998 with balance of more than $30,000 in FFEL or DL

Payment amounts can be fixed annually or graduated

Maximum repayment term is 25 years

More interest may accrue over the life of the loan

Principal balance decreases at a slower rate


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Trouble Paying?

Contact your lender!

You may be able to reduce your monthly payments if you qualify for an alternate repayment schedule

You may be able to temporarily postpone your payments if you qualify for a deferment or if you qualify for a forbearance


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Deferment

Time period when repayment is temporarily suspended

A deferment period may be granted for:

At least half-time enrollment at an eligible school

Graduate fellowship

Rehabilitation program

Unemployment

Economic hardship

Military Service

These deferments apply to loans made on or after July

1, 1993. If you have a loan made before that date,

check your promissory note.


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Forbearance

You are unable to make your scheduled payments but you do not qualify for a deferment

Forbearance allows you to

Reduce the amount of your payment

Temporarily stop payments

Most forbearance is discretionary – it is up to your lender to decide to grant forbearance.


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Forbearance

These conditions might qualify you for forbearance

Personal problems such as poor health or economic hardship

Being affected by circumstances such as a national or local emergency, military mobilization or natural disaster

Exhausting your eligibility for an internship deferment

Serving in a position that may qualify you for loan forgiveness, partial repayment of your loan or national service educational award


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Forbearance

You are still responsible for the interest that accrues during forbearance.

Try to pay it. Capitalized interest is added to the principal balance and increases your total outstanding debt and possibly your monthly payments


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Combining Loans

You have multiple lenders

You are making the minimum payment on multiple loans

Consolidation means one monthly payment to one lender

Determine which lender offers consolidation loans and which one can best serve you

Request that lender purchase your other loans


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Federal Consolidation Loan

Benefits

Extended repayment of up to 30 years, based on your loan balance

One monthly payment

Can prepay or change repayment plans

Fixed interest rate


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Federal Consolidation Loan

Drawbacks

Extra interest over the life of the loan if you are in a longer repayment period

Loss of eligibility for certain deferment, forgiveness, cancellation and grace period benefits

Different lenders may offer different borrower benefit programs and you might lose some of those benefits you previously had


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Loan Cancellation – Stafford Loan

Your death

You become totally and permanently disabled

Your school fails to pay a refund if you withdraw

Your school closes and you are unable to complete your program of study as a result

Your loan was falsely certified as a result of identity theft

Your school falsely certified or fraudulently completed a loan application in your name without your approval


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Loan Forgiveness

Teacher Loan Forgiveness – Stafford Loans

First loan was made on or after October 1, 1998

You teach in a qualifying low-income school for 5 consecutive years


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Loan Forgiveness

Public Sector Employee Forgiveness – Federal Direct Stafford & Federal Direct GradPLUS Loans

You made 120 monthly payments on eligible loans after October 1, 2007

You are employed in a public-service job at the time of forgiveness and have been employed in a public-service job during the 120 month period

You can consolidate your FFEL loans into Direct Loans to participate in this program


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Loan Forgiveness – Stafford Loan

Service in Areas of National Need

For each school, academic or calendar year of full time employment in an area of national need that you complete on or after August 14, 2008

Up to $2,000 of your outstanding loan balance will be forgiven

Maximum of $10,000 can be forgiven

Cannot receive forgiveness for more than 5 years of service

This program is subject to federal funding and availability


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Loan Repayment Programs – Stafford Loan

These programs may help you repay your loan

AmeriCorps service program

www.americorps.org

800-942-2677

Service as an enlisted person in the National Guard or Reserve program

Contact your recruiter for more information


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Repayment Tips

Keep loan records in good order

Update your contact information

Pay on time – or early

Set up automatic draft for your student loan payment

Call your lender at the first sign of trouble.


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Use NSLDS

National Student Loan Data System (NSLDS)

Use NSLDS to monitor all of your federal student loan debt

www.NSLDS.ed.gov

800-999-8219

You’ll need your federal student aid PIN to access.

Any private or alternative loans you have borrowed will not be listed on NSLDS.


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Possible Tax Benefits

You may be eligible to deduct up to $2500 of the student loan interest you paid

Check with the IRS or your tax advisor

Tax benefits can change on an annual basis

Review IRS publication 970 “Tax Benefits for Education”

More information available at www.irs.gov


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Delinquency and Default

When you fail to make your payment on time, you are delinquent in meeting your obligation

When you fail to make your payments for 270 days, you will be in default on your student loan

There are serious consequences to defaulting on your student loan obligation


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Consequences of Default

Damaged credit rating

Referral to a collection agency

Collection costs are added to your debt

Garnishment of your wages

Federal or state tax refunds, Social Security benefits, etc. can be withheld

Civil lawsuit filed against you (court costs and legal fees)

Loss of deferment and forbearance entitlements

Loss of repayment option flexibility

Loss of eligibility for further financial aid

Suspension of professional license


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Resources

Mappingyourfuture.org

CFNC.org

CFNC resources are available to all students, regardless of lender used for their loans

Ed.gov

NCHELP

Common Manual

US Department of Education publications


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CFI Stafford Borrower Benefits

Benefits on a Stafford Loan from CFI first disbursed between July 1, 2006 - September 30, 2008

No origination or federal default fees.

Immediate interest rate reduction of 1% for on-time payment when you start repaying your loan.*

Interest rate reduction of 1.5% if you make monthly payments by automatic draft** and elect to receive electronic statements


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CFI PLUS Borrower Benefits

Benefits on a PLUS Loan from CFI first disbursed between July 1, 2006 - September 30, 2008 

No federal default fee and a 3% credit of the amount borrowed following the academic year in which your loan is first disbursed.

Immediate interest rate reduction of 0.75% for on-time payment when you start repayment.* And, if you are a Graduate/Professional PLUS Loan borrower, the on-time rate reduction begins even when you have an in-school deferment.

Interest rate reduction of 1.25% if you make monthly payments by automatic draft** and elect to receive electronic statements.


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CFI Stafford Borrower Benefits

Benefits on a Stafford Loan from CFI first disbursed on or after October 1, 2008 are: 

No origination or federal default fees.

Interest rate reduction of .25% if you make monthly payments by automatic draft


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CFI PLUS Borrower Benefits

Benefits on a PLUS Loan from CFI first disbursed on or after October 1, 2008 are: 

No federal default fee.

Interest rate reduction of .25% if you make monthly payments by automatic draft


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CFNC.org

866-866-CFNC

Remember, CFNC resources are available to all North Carolinians, regardless of which lender they’ve used for education loans

Best wishes!


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