Helping Borrowers Understand Loan Repayment

1. NYSFAAA 44 “On Track for Excellence” 10/11/12 Helping Borrowers Understand Loan Repayment Gina Soliz Director of Financial Aid Syracuse University College of Law

2. Today’s Topic How to educate prospective, current and graduating students about budgeting & creating successful loan repayment strategies

3. Today’s Topic • Overview of repayment plans • Standard • Extended • Graduated • IBR • ICR-A

4. The lifecycle of a student’s relationship with the FA Office

5. Prospective Students Tours – appointment with Admissions and Financial Aid Pre-Law Advisors – make sure they have the correct information Visitor Days/Open Houses – everything is out in the open

6. Current Students • One-on-one appointments • Videos/Testimonials • FA Focus Group • Workshops • LMFAO • Law students managing financial aid opportunities

7. LMFAO Students: can you define any of the following acronyms?  IBR PSLF NSLDS DL FAFSA OMG LOL

8. What We Know We Should Do What We Actually Do LMFAO – Good Habits vs. Reality • Get 8 hours of sleep each night • Sleep for a few hours or fall asleep watching TV, or reading, or at our desk…

9. What We Know We Should Do What We Actually Do LMFAO – Good Habits vs. Reality • Eat healthy food • Eat burgers and drink beer

10. What We Know We Should Do What We Actually Do LMFAO – Good Habits vs. Reality • Brew our own coffee at home • Go out to a coffee shop

11. What We Know We Should Do What We Actually Do LMFAO – Good Habits vs. Reality • Stick to a budget, live within our means, save money! • Spend what we have (sometimes more than what we have!)

12. What We Know We Should Do What We Actually Do LMFAO – Good Habits vs. Reality • Write out a “spending plan” and stick to a budget • Feel overwhelmed, lose track of how we spend our money

13. From LMFAO:Why are you here today? You want to understand the jargon and acronyms. You taken out student loans and want to know more about them. You realize that what you don’t know can hurt you! You could use some advice regarding your finances. Free cookies!

14. From LMFAO:How Can You Cut Back? • Prioritize. • Don’t buy Starbucks! • Cook at home.

15. Alumni New graduates Six months out Blasts from the past! Do recent alumni contact the office or use the Financial Aid Office as a resource after graduation? Do you hear from graduates long after they have earned their degree?

16. The Basics Servicers (who) FFEL vs. DL (what) NSLDS (where) Timing of repayment (when) Repayment options (how)

17. What: Federal Student Loans • Federal Family Educational Loans (FFEL) • Loans borrowed through a lender (ex. Citibank, Wells Fargo, Chase, Access Group, Sallie Mae) • Please note: The FFEL program ended 6/30/10 • Direct Loans (DL) • Loans borrowed directly from the federal government (studentloans.gov) • All colleges and universities mandated to use the DL program beginning 7/1/10

18. Where to find a summary: www.nslds.ed.gov 1 2 3 4 5

19. www.nslds.ed.gov The name of each loan servicer and its contact information will display under the loan details. Borrowers may have several different agencies servicing each loan.

20. Who is repaid: Servicers • List of servicer websites, addresses, and phone numbers on IFAP http://www.ifap.ed.gov/ifap/helpContactInformationDetailedList.jsp?lsc=2 • ACS, Aspire, Corner Stone, EdFinancial, Granite State, PHEAA, Great Lakes, MOHELA, NelNet, Sallie Mae, etc. etc.

21. When Does Repayment Begin? • Federal Subsidized & Unsubsidized Loans • Law school loans have 6-month grace period following graduation • Loans borrowed prior to law school have a 6-month grace if they never entered into a prior repayment status • Federal Graduate PLUS Loan • Loans borrowed after7/1/08 have a 6 month Post Enrollment Deferment

22. How do I Successfully Repay? Standard Repayment on Federal Loans is 10 years Extended Repayment prolongs payments over 25 years (must have more than $30,000 in federal student loan debt). Graduated Repayment – 10 years – payments start low and increase in one or more increment over time.

23. Comparing Payment Plans

24. Repayment Plans (cont.) • Income-Based Repayment caps the monthly payment amount based on your income and family size. • May offer the lowest monthly loan repayment • All federal student loans are eligible for IBR (including Federal Stafford and Federal Graduate PLUS loans) • Borrowers in any employment type or situation may apply

25. IBR Can Be Confusing !! Income-Based Repayment caps the monthly payment amount based on your income and family size – capped at the Standard 10 year repayment amount. After 25 years, borrowers may receive loan forgiveness (currently, the IRS views IBR loan forgiveness as a taxable event) Income Based Repayment (IBR) may offer borrowers the lowest monthly loan repayment All federal student loans are eligible for payments under the IBR calculation (including Federal Stafford and Federal Graduate PLUS loans). Parent PLUS Loans are not eligible (nor are Federal Consolidation Loans that include a Parent PLUS). Borrowers in any employment type or situation may apply Borrower can choose to exclude spouse’s income (however, tax returns would be filed as ‘married filing separately’) Payments could change annually (annual income and family size verification is required) Payments are applied to the interest first and principal last (negative amortization may occur) Interest is capitalized when the borrower stops participating in IBR (this will occur if the borrower no longer demonstrates partial financial hardship)

26. Income Based Repayment Income Based Repayment (IBR) examples (based upon 2012 poverty guidelines) assumes borrower resides in 48 contiguous states

27. IBR (continued) ADVANTAGES: You are paying based on what you earn, the government will pay your unpaid accrued interest on your Subsidized Loans for up to three consecutive years from the date you began repaying your loan under IBR, 25 year cancellation, Public Service Loan Forgiveness (if 10 years of payments are made while working in a qualifying job). DISADVANTAGES: A borrower could pay more over the life of the loan (usually, the more quickly you pay off a debt, the less you pay overall), you may have to pay taxes on the amount that is cancelled.

28. Federal Direct Unsubsidized Loan Repayment Example An average law student borrows $61,500 in Federal Direct Unsubsidized Loan ($20,500/year for 3 years) Assuming the borrower does not pay interest while in-school, the debt upon graduation will be $68,100 10 year standard monthly payment will be $784/month 25 year extended monthly payment will be $473/month

29. Federal Direct Grad PLUS Example An average law student borrows $84,000 in Federal Direct Unsubsidized Loan ($28,000/year for 3 years) Assuming the borrower does not pay interest while in-school, the debt upon graduation will be $94,500 10 year standard monthly payment will be $1,142/month 25 year extended monthly payment will be $733/month

30. Grand Total $162,600($20,500/yr Unsub and $28,000/yr Grad PLUS) • 10 year standard monthly payment = $1,926 • Total paid over 120 months is $231,031 • 25 year extended monthly payment = $1,206 • Total paid over 300 months is $358,734

31. Direct Loan Repayment Examples Total monthly savings: $327/month $206/month Total saved over life of loan: over $39,000 nearly $62,000

32. How Can I Reduce My Borrowing? • Decrease your spending • Increase your “gift aid” • Go to the Outside Scholarships section of our webpage www.law.syr.edu/fa

33. From LMFAO:If $20,000 were to come to you unexpectedly, what would your first impulse be? Shoe shopping Back pack around the world Pay down my student loans What is your money personality?

34. From LMFAO: What is your money personality? Amasser: If you tend to be a money amasser, you are happiest when you have large amounts of money at your disposal to spend, to save, and/or to invest Avoider: If you tend to be a money avoider, you probably have a hard time balancing your checkbook, paying your bills promptly, and doing your taxes until the very last minute. You may avoid making a budget or keeping any kind of financial record. You won't know how much money you have, how much you owe, or how much you spend

35. From LMFAO: What is your money personality? Hoarder: If you tend to be a hoarder, you like to save money. You also like to prioritize your financial goals. You probably have a budget and may enjoy the processes of making up a budget and reviewing it periodically Money Monk: If you are a money monk, you think that money is dirty, that it is bad, and that if you have too much of it, it will corrupt you. In general, you believe that "money is the root of all evil."

36. From LMFAO: What is your money personality? Spender: If you are a spender, you enjoy using your money to buy yourself goods and services for your immediate pleasure. You probably get satisfaction from spending money on gifts for others. The odds are that you have a hard time saving money and prioritizing the things you'd like in your life.

37. Successful Loan Repayment • To be successful… • develop a short-term plan now (an in-school budget) and • develop a long-term loan repayment plan (keeping in mind career objectives and job market fluctuations)

38. Legal Job Market • Employment prospects and salaries for new law graduates have been affected by the economy.  • Class of 2010 graduates reported salary ranges from $32,000 (public interest law) to $160,000 (large firm practice). • Average starting salary for all employment types was $67,400

39. Estimate Your Salary after Graduation

40. Borrowing Less = Repaying Less! Think carefully about your future financial and personal goals and what you might have to give up once you’re working in order to pay back the debt you incurred as a student.

41. Other Talking Points Public Service Loan Forgiveness Deferments & Forbearances Mandatory Exit Counseling Federal Direct Consolidation Loans ICR-A

42. Loan Repayment Strategy Know how much is owed and to whom Understand terms & conditions of your loans Define your financial goals Develop an affordable budget Select a repayment plan Be aware of loan forgiveness programs Keep good financial records

43. Contact Me Gina M. Soliz Syracuse University College of Law gmsoliz@law.syr.edu