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?