After You Graduate - Guide To Repaying (Ebook)

Table of Contents
2 Understanding Loan Repayment Terms ................................................................................................ 4 Repayment Plans ...................................................................................................................................... 10 Loan Prepayment ...................................................................................................................................... 15 Borrower Benefits ...................................................................................................................................... 15 Identifying Your Financial Goals .............................................................................................................. 16 Establishing Your Spending Plan ............................................................................................................ 18 Picking the Repayment Plan Thats Best for You ................................................................................. 21 Understanding Your Rights and Responsibilities................................................................................... 26 Keeping Good Financial Records ............................................................................................................ 32 Summary .................................................................................................................................................... 34 Office of the Ombudsman U.S. Department of Education ................................................................. 35 Tips for Managing Loan Repayment ...................................................................................................... 35 Terms You Should Know ........................................................................................................................... 36 Your Borrower Rights and Responsibilities ........................................................................................... 40 Helpful Online Resources ......................................................................................................................... 42
Repaying Your Student Loans ................................................................................................
This publication focuses on repayment of federal loans and is intended to supplement the information you receive in exit counseling conducted by your school. Its not intended to replace the exit counseling program offered by the school you attend. The information presented in this publication also should be helpful in planning for and managing repayment of all your student loans. The information in this publication is current as of March 2012.
Borrower Reminder
Youre required to repay your loans along with any interest and fees that are assessed according to the terms of the promissory note and repayment schedule. Full repayment is required even if you dont complete your program of study, dont complete the program within the regular completion time for that program, dont obtain employment upon completion of your degree, are dissatisfied with the education or other services you received from your school, or dont receive a monthly billing statement from your loan servicer.
After You Graduate: A Guide to Repaying Your Student Loans
Repaying Your Student Loans:

A Guide to Picking the Repayment Plan Thats Right for You
The thrill of graduating and a bit of reality about whats next
Congratulations on completing your degree. You studied hard, worked long hours and survived. Of course, you still have a few things on your plate and one of those is the reality of repaying your student loans. Youve already proven youre up to the challenge of graduate and professional school, so youll get through this as well. Whats more, your loans are an investment in your future. A good investment. And as youre about to learn, there are ways to manage repayment without becoming overwhelmed. Thats what this workbook is about.
Take time out to plan

Soon enough youre going to have to make decisions, but you have time to breathe and work out a few things. You should start by sitting down and identifying some goals. What is it you want to do over the next couple of years? The next 10 or 20? You dont have to have all of the answers now, but it will be helpful to have an idea. Theres a worksheet provided in this workbook that can help. It will have you look at things such as your expected lifestyle and when you hope to reach different financial milestones. Theres also a worksheet thats intended to get you thinking about your personal spending plan. We suggest you go through the worksheet before you celebrate your degree by buying a new car or giant screen television. Creating a personal spending plan will help you to focus on the real cost of things, how quickly those costs add up, and how your student loans fit into the mix. This doesnt have to be overwhelming, but it does require planning, discipline AND picking the right loan repayment plan.
Its not so much juggling as prioritizing

Just as you have things you own, there are others that you owe. Of course, this includes your student loans. You may also have credit card debt, a car loan, maybe even a mortgage. Eventually youll want to eliminate all (or at least the majority) of your debt, but for most people at this stage of their lives that isnt possible. Instead what you want to do is leverage your debt. For example, federal student loans come with relatively low interest rates. So one possibility is to lower your monthly payments on your federal student loans by extending your repayment period and using the money available each month to pay off the debt on loans with higher interest rates. That way you pay off the more expensive debt sooner. Even if you only have federal student loan debt, you might still consider extending the repayment period on Federal Subsidized and Unsubsidized Loans in order to prepay higher cost Grad PLUS loans. It is these tricks of the trade that this workbook can help you discover. Most importantly, remember that choosing the right repayment plan can make a difference in your future financial situation.
Stay with the program

Okay, this might not be exciting, but it is very important. Stick with this workbook and youll gain valuable insight into how you can successfully repay your student loans and achieve your other financial goals. Youve worked too hard in school to ease up now. To help you decide on the best repayment plan for you, this book will focus on the following six elements: 1. Understanding the repayment terms of your federal loans
2. Identifying your short- and long-term goals 3. Establishing your personal spending plan 4. Picking the repayment plan thats right for you 5. Understanding your rights and responsibilities as a borrower 6. Keeping good financial records
On each page theres room to write down any questions you have while reading this workbook. If these questions arent answered by the time you finish, contact your schools financial aid office and/or your loan holder/servicer for clarification. Its important to understand all aspects of repayment if youre to succeed in repaying your student loans.
Activity I Get It!
Once youve completed this workbook, you should understand the following concepts related to loan repayment. Put a check mark beside each item when you feel youve got it covered.
K Master Promissory Note K Interest rates K Who you must repay K When loan repayment begins K Available repayment plans K Deferment/forbearance options K Loan prepayment K Default and its consequences
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K Borrower rights and responsibilities K Loan discharge, forgiveness K Role of spending plans in repayment K Importance of identifying financial goals K Tools to help in repayment K Picking your repayment plan K Keeping good financial records
Understanding Loan Repayment Terms

Beginning repayment of your student loans can often seem like a confusing and complex process. Successful repayment requires that you understand the basics of your loans and the repayment plans available to you.
Changes, Changes, Changes

Federal education loans are low-cost loans that are guaranteed by the federal government. Prior to July 1, 2010, two federal loan programs existed: the Federal Family Education Loan (FFEL) Program and the Federal Direct Loan (FDL) Program. Institutions decided which program to participate in and students either borrowed from the commercial lenders in the FFEL Program or directly from the federal government in the FDL Program. As of July 1, 2010, federal education loans can only be originated through the Federal Direct Loan Program. This means you may have loans in both programs. The terms and conditions of the two programs are very similar; however, there are some differences. This guide will make every effort to document when a particular detail is specific to a particular program. Available loans for graduate students in the Federal Family Education Loan Program were: Federal Subsidized Stafford Loans; Federal Unsubsidized Stafford Loans; and Federal Graduate PLUS Loans. Often these Federal Subsidized and Unsubsidized Loans, are referred to as the Federal Stafford Loan Program. Loans that were and still are available for graduate students in the Federal Direct Loan Program are: Federal Direct Subsidized Loans; Federal Direct Unsubsidized Loans; and Federal Direct Graduate PLUS Loans.
The Master Promissory Note

You completed a Federal Loan Master Promissory Note (MPN) in order to borrow from the Federal Stafford Loan Program and/or the Federal Direct Loan Program, as well as a Federal PLUS Loan Application and MPN to borrow a Federal PLUS Loan. The MPNs are the legally binding contracts between you and the lender of your loans. In signing these documents, you agreed to repay the funds you borrowed along with any interest that accrued and fees that were charged.
Federal Stafford and Federal Direct Subsidized and Unsubsidized Loans

The subsidized and unsubsidized loans in both programs are very similar. A subsidized federal loan is a need-based loan on which interest is paid by the federal government while youre in school, during the grace period, and during approved deferment periods. Conversely, interest on an unsubsidized federal loan begins accruing as soon as the funds are disbursed by the lender. Youre responsible for paying all interest that accrues on an unsubsidized loan. You may either pay the interest during inschool, grace, and approved periods of deferment and forbearance, or the interest will be deferred and capitalized (added to the principal balance) prior to repayment.
Federal PLUS Loans

Graduate and professional students are eligible to borrow a Federal PLUS Loan, commonly referred to as the Grad PLUS Loan. Also available to the parents of dependent undergraduate students as the Parent PLUS Loan, this is an unsubsidized education loan that has no grace period, and thus goes into repayment as soon as funds are disbursed to the borrower. However, the Grad PLUS Loan has deferment and forbearance options similar to those of the Federal Unsubsidized Loan. As such, graduate and professional students can postpone repayment using the In-School Deferment while enrolled at least half-time in an eligible program of study. You also may be eligible to postpone repayment once youre no longer enrolled as a student. For example, Grad PLUS Loans first disbursed on or after July 1, 2008, are eligible for an automatic six-month post-enrollment deferment. This will allow you to begin repaying your Grad PLUS loans at the same time as your unsubsidized or subsidized loans. You can request forbearance from your loan servicer on Grad PLUS loans first disbursed prior to July 1, 2008, for the same purpose. During any period of deferment or forbearance, interest can accrue and be added to the principal loan balance (capitalized) at the end of the deferment or forbearance period if it is not paid by the borrower as it accrues. More information about deferment and forbearance is provided later in this workbook.
Interest Rates
The interest rate is the percentage youre charged by the lender to borrow the loan funds. As noted earlier, in the case of federal subsidized loans, the federal government pays the interest that accrues during in-school, grace and approved deferment periods. For federal unsubsidized loans and the Federal PLUS Loans, you must pay all of the interest that accrues. You may choose to delay payment of this interest until repayment begins; however, the accrued interest will be capitalized (added to the principal balance) before repayment begins and at the end of any deferment or forbearance period. Whatever the case, youre responsible for paying the interest that accrues during the repayment period.
Federal Stafford and Federal Direct Subsidized and Unsubsidized Loans

(borrowed by graduate and professional students) Loans with a first disbursement on or after July 1, 2006: Fixed rate of 6.8% Loans with a first disbursement on or after July 1, 1998, but before July 1, 20061 have a variable interest rate: Subsidized: During in-school, grace, and deferment periods: interest paid by the federal government During repayment and forbearance: 91-day U.S. Treasury Bill (T-bill) + 2.3% Unsubsidized: During in-school, grace, and deferment periods: 91-day T-bill + 1.7% During repayment and forbearance: 91-day T-bill + 2.3%
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Contact your current loan servicer for information on the interest rate of any Federal Stafford Loan borrowed prior to July 1, 1998.
An important note about the variable interest rate on federal loans: As you can see, the interest rate is variable for federal loans with a first disbursement on or after July 1, 1998, but before July 1, 2006. This variable rate is reset each year on July 1. Its based on an index the bond equivalent rate of the 91-day T-bill auctioned at the final auction before June 1 of each year plus a per annum percentage margin (i.e., the spread). The variable rate also can change because the status of the loan changes from an in-school to an in-repayment status, for example, as shown above. The interest rate on these loans is capped at 8.25%. Youll be notified of interest rate changes throughout the life of your loan by your loan servicer.
Federal PLUS Loans

The interest rate on Federal PLUS Loans in the FFEL Program with a first disbursement on or after July 1, 2006 is fixed and equal to 8.5%. (Loans first disbursed prior to July 1, 2006 have variable rates.) The interest rate on Federal Direct PLUS Loans with a first disbursement on or after July 1, 2006 is fixed and equal to 7.9%. (Loans first disbursed prior to July 1, 2006 have variable rates.)
Partners in Loan Repayment

The following organizations may be involved with your student loan repayment: U.S. Department of Education the federal agency that administers several major student aid programs, including the Federal Direct Loan Program. It produces, distributes, and processes the Free Application for Federal Student Aid (FAFSA), which was used to determine your eligibility for federal funds. Also performs the function of lender for the Direct Loan Program. Lender the bank, savings and loan company, credit union or other approved organization from which you borrowed the loan. Holder the party that currently owns the loan and holds its legal title. Guarantor a state agency or private, nonprofit organization that insures lenders against losses due to a borrowers default, death, disability or bankruptcy. Secondary Market an organization that buys loans from lenders. Selling loans is a common practice among lenders, so the institution or organization you make your payments to may change during the life of the loan. The terms and conditions of your loan dont change when its sold to a secondary market holder. Servicer a company that specializes in handling loan repayment activities such as billing, collections and deferments. Many lenders hire servicers to manage student loan repayment activities. This typically is the first organization to contact if you need assistance during loan repayment.
Who You Repay

Federal Family Education Loan Program
You repay the holder of your loans promissory note. This may be the original lender or a subsequent lender or secondary market to which your loan was sold. In addition, the holder may contract with a servicer to manage some or all of the transactions associated with repayment. If a servicer is being used, you first should contact the servicer with any questions or concerns you have about your loan(s). Remember, if your loan was sold, the current holder will not be the original lender. Youll be notified in writing if your loan is sold or if there is a change in servicer. If you want to identify your loan servicer you can access your loan information at www.nslds.ed.gov.
Federal Direct Loan Program

The Department of Education contracts with third party companies to service loans in the Federal Direct Loan Program. To determine who is servicing your loans you can access your loan information at www.nslds.ed.gov.
National Student Loan Data System (NSLDS) You can obtain information about your Federal Title IV loans and grants from the National Student Loan Data System (NSLDS) at: Toll-free telephone: 800-4FED-AID (1-800-433-3243) Website: www.nslds.ed.gov
The National Student Loan Data System (NSLDS) is a confidential database that is maintained by the U.S. Department of Education. Its an excellent source of information about who currently holds/services your federal student loans, how much you owe, and the current status of each loan. Youll need your PIN to access your information on NSLDS. This is the PIN that was assigned to you when you completed the FAFSA or Renewal FAFSA. If you dont know your PIN, theres information on the NSLDS website on how to obtain a new one or you can apply for a new PIN online at www.PIN.ed.gov.
When Repayment Begins

Some student loans enter repayment following a grace period. Other loans enter repayment as soon as they are fully disbursed. In most cases, federal loans are placed immediately in an in-school deferment as long as youre enrolled at least half time as a student. The in-school deferment ends when you drop below half-time enrollment. If the loan has a grace period, it begins when your enrollment status drops below half time and ends when the loan enters repayment. Typically, your first payment on a federal loan is due within 60 days after entering repayment. Interest continues to be paid by the federal government on federal subsidized loans during the grace period. Federal unsubsidized loans continue to accrue interest during the grace period, but the accrued interest does not have to be paid at that time; it can be capitalized (i.e., added to the principal balance) when repayment begins. The length of the grace period varies by loan type and should be specified in the loan promissory note. The current grace periods for the following student loans are: Federal Stafford Loans 6 months Federal Direct Subsidized and Unsubsidized Loans 6 months Federal PLUS Loans No grace period Federal Direct PLUS Loans No grace period Federal Consolidation Loans No grace period Federal Perkins Loans 9 months Private Loans Check promissory note
The purpose of the grace period is to give you time to get on your feet financially and prepare for repayment. Its important to remember, however, that you should not base your monthly spending plan on the amount of discretionary income youll have during the grace period. Because youre not required to make loan payments during the grace period, you probably will have more discretionary income than youll have once repayment begins. This can give you a false sense of wealth and might lead to financial choices that cant be sustained once you start repaying your student loans. Make sure you create your spending plan to accommodate your monthly loan payments after all grace periods have ended and repayment has begun on all loans.
Pay close attention to your grace period when creating your spending plan.
If the loan doesnt have a grace period, you may be able to request a deferment or forbearance (if one is not provided automatically by your loan holder/servicer) in order to postpone repayment of the loan and/or align repayment with the repayment on loans you borrowed that do have a grace period. Prior to the start of repayment, youll receive a repayment schedule for each student loan you borrowed while in school. Among other things, it will list: the total amount you owe; your estimated monthly payment amount (based on the Standard 10-year fixed Repayment Plan); the date your first payment is due; information about the different repayment plans and how to select the best plan for you; and where payments should be mailed. If you dont receive this schedule at least one month prior to the start of repayment, contact your loan servicer.
Repayment Plans
There are various federal loan repayment plans available. Specifically, there are five repayment plans available for repaying Federal Stafford and Federal PLUS Loans and five repayment plans offered for repaying Federal Direct Subsidized and Unsubsidized and Federal Direct PLUS Loans. Four of the repayment plans crossover both programs.
FFEL Program Only

IncomeSensitive
Both
Standard Graduated Extended Income-Based
FDL Program Only

IncomeContingent
You can choose the repayment plan that best meets your needs based on your financial goals and what you can afford to pay each month. You can change your repayment plan as frequently as every 12 months, if necessary.
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The following chart provides a brief summary of each plan. It highlights the differences in payment structure (fixed payments or payments that can change over time) and the maximum length of the repayment period (10 25 years).
Options
Standard*
Payment Structure
Fixed
Maximum Repayment Period

10 years
Additional Features
- Highest initial payment - Lowest total interest - No negative amortization - Interest only payments initially - Payments increase incrementally - No negative amortization - Monthly payments cant be more than three times greater than any other payment (3 times rule) - Lowest initial payment without considering income - No negative amortization - To qualify: - Debt must be > $30,000 - First borrowed on or after 10/7/98 - Subject to 3 times rule - No negative amortization - Eligibility/payment amount re-evaluated annually - Payment is 15% of disposable income if experiencing partial financial hardship - Eligibility/payment amount re-evaluated annually - Negative amortization allowed - Payment is lesser of repayment amount if repaid in 12 years multiplied by an income percentage factor that varies with your annual income or 20% of your monthly discretionary income - Payment amount re-evaluated annually - Negative amortization allowed
Graduated*
Changes incrementally over time
10 years
Extended*
Fixed or graduated
25 years
IncomeSensitive**
Can change annually based on total gross income
15 years
Income-Based Can change annually Repayment (IBR)* based on:

- Household AGI - Household size - Poverty guideline - State of residence
25 years
IncomeContingent***
Can change annually based on: - Household AGI - Household size - Poverty guidelines - State of residence
25 years
Repayment options available for: *Federal Family Education Loan Program or Federal Direct Loan Program **Federal Family Education Loan Program only ***Federal Direct Loan Program only To qualify, borrowers must have a total loan debt in excess of $30,000 in one or both federal loan programs, independently.
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Standard Repayment (FFEL and FDL)

In this plan, you pay an equal (fixed) amount each month for up to 10 years. The monthly payment on a Federal Stafford Loan and/or a Federal Direct Subsidized or Unsubsidized Loan with a variable interest rate will be adjusted whenever the variable rate changes (once a year on July 1). Each payment includes both interest and principal. The minimum monthly payment is $50, but your actual payment amount and repayment period will depend on the total amount owed. If for one reason or another you neglect to choose a repayment plan, your loan servicer will place your loan(s) in this plan. This plan has the highest initial monthly payment, since payments include both interest and principal, but it also has the lowest cost in total interest paid over the life of the loan. This may be the right option for those who wish to be debt-free as quickly as possible.
Graduated Repayment (FFEL and FDL)

Under this plan, the minimum monthly payment amount increases at specific intervals over time. Initial payments are lower than under the Standard Repayment Plan because early payments typically cover only the accrued interest each month. As principal is included in the payment the minimum monthly payment amount increases. In addition, no payment can be three times greater than any other payment. The total interest cost is higher over the length of repayment with this plan than with the Standard plan. The repayment period with this plan is 10 years. Since the monthly payment can increase significantly at the specified intervals, the Graduated plan is generally best suited for those who expect large salary increases at predictable points in time. Before selecting this plan, be sure that youll be able to afford the increased monthly payments at the higher levels. All lenders are required to offer at least one graduated repayment plan; they may offer multiple graduated options.
Extended Repayment (FFEL and FDL)

Eligible borrowers can extend their maximum repayment period to 25 years using either fixed or graduated monthly payments. The cost in interest is greater over the life of the loan with this plan, but the money youre not paying each month on your loan(s) gives you flexibility to pay other expenses, including paying off higher cost debts such as those you might have on your credit cards, or to invest for the future (provided youre able to do so at an average rate of return that you expect to be higher than the interest rate youre paying on your student loans). Plus, there is no penalty for prepaying your loans, so you can pay more during the months you have extra money, if you choose to do so. This plan is available to borrowers whose total program specific debt exceeds $30,000 and whose first federal loan was borrowed on or after October 7, 1998 (or who, on the date a post-October 7, 1998 federal loan was obtained had no outstanding federal balance on a loan obtained prior to October 7, 1998). For example, if you have loans in both the FFEL and FDL Programs, the extended repayment option is only available if you have in excess of $30,000 in both programs separately.
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Income-Contingent Repayment (ICR) (FDL only)

Borrowers with Federal Direct Subsidized, Federal Direct Unsubsidized and Federal Direct Grad PLUS Loans are eligible for this repayment plan. Monthly payments are determined annually based on income (and spouses income, if married), family size, and the total amount of Federal Direct Loans. Any remaining loan balance is forgiven after 25 years of repayment. Under current IRS regulations, the amount forgiven is considered taxable income.
Income-Sensitive Repayment (ISR) (FFEL only)

With this plan, available to borrowers with Federal Stafford and Federal Grad PLUS Loans, your monthly payments are based on your anticipated total monthly gross income and student loan debt, and are reviewed and adjusted, if necessary, annually. The monthly payment can be no less than the amount of accrued interest and no more than three times greater than any other payment. You must provide any requested income documentation to qualify for this plan. This documentation allows the loan servicer to determine a reasonable monthly payment amount. If the loan servicer considers the reported income to be insufficient to repay the loan within 10 years, the repayment period may be extended up to an additional five years. This plan results in higher total finance charges than under the Standard plan because loan principal is not repaid at the same rate as in that plan. Youll need to reapply for this plan each year and must provide requested income documentation.
Income-Based Repayment (IBR) (FFEL and FDL)

This plan is available to repay a Federal Stafford Loan, Federal Direct Subsidized and Unsubsidized Loan, Federal Grad PLUS Loan, Federal Direct Grad PLUS Loan, Federal Consolidation Loan or Federal Direct Consolidation Loan (not including consolidation loans that included the payoff of a Parent PLUS Loan). To qualify for this plan, you must be experiencing partial financial hardship at the time you enter the plan. Partial financial hardship exists when the annual amount youd be required to pay under the Standard Repayment Plan exceeds 15% of your disposable adjusted gross income. Disposable adjusted gross income is defined as that portion of your household adjusted gross income that exceeds 150% of the poverty guideline for your household size and state of residence. As such, the monthly IBR payment is based on your households adjusted gross income, your household size, and the poverty guideline for your household size and state of residence. Payments change as these factors change. Once in IBR, your monthly payment is the LESSER of: 15% of your disposal adjusted gross income (as defined above), or the amount required under the Standard (10-year fixed) Repayment Plan at the time you entered IBR. The maximum repayment period is 25 years. Any eligible debt remaining after 25 years of being in this plan will be forgiven by the federal government. Under current IRS regulations, the amount forgiven may be treated as taxable income in the year its forgiven. Eligibility for and determination of a reduced payment amount must be re-evaluated and adjusted, as needed, annually. You are required to provide verification of both your household adjusted gross income and household size each year youre in IBR.
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A Quick Summary of Income-Based Repayment (IBR):

Calculated payment is 15% of disposable income Disposable income is that portion of household adjusted gross income that exceeds 150% of the U.S. Department of Health and Human Services (HHS) Annual Poverty Guideline for your household size and state of residence Monthly payment can be less than accrued interest (in other words, it allows for negative amortization) Any unpaid interest that accrues on your federal subsidized loan debt will continue to be subsidized (paid by the government) for the first 36 months of IBR When using IBR, the repayment period can extend beyond 10 years regardless of the amount of your eligible debt Any outstanding eligible loan balance is cancelled after 25 years of being economically challenged You are economically challenged during any month when one of the following three situations is true: (1) you made a payment using IBR, (2) the amount of your monthly payment was at least equal to the amount that would have been required under the Standard Repayment Plan at the time you entered IBR, or (3) you were in an Economic Hardship deferment.
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Loan Prepayment
When considering the length of repayment, remember that you have the right to prepay any of your student loans without penalty. In other words, you can pay more than the required minimum payment on a loan at any time or make a loan payment when one is not required (during the grace period, for example). By doing so, youll save the interest that would have accrued on that amount if you had not made the prepayment. When prepaying a loan, you should: Prepay the highest-cost loan first. When you have a choice of which loans to prepay, you generally should first direct the money to the loans with the highest interest rates. This usually means private loans first, followed by your federal student loan debt. Contact your loan servicer before you make the first prepayment to find out where to send it and what instructions you need to provide so that it will be processed according to your wishes.
Borrower Benefits
Save where you can! Your loan holder may offer either an interest rate reduction or a principal reduction for certain repayment activities. The most common benefit offered is for auto-debit payments (this is when you authorize your loan servicer to automatically debit your monthly loan payment from a checking or savings account). These benefits typically do not depend on the repayment plan you choose. Take advantage of the benefits offered by your loan holder. Contact them for more information.
Ive contacted my loan holder and I qualify for these Borrower Benefits:
__________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________
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Federal Loan Consolidation

You can refinance your eligible federal student loans via federal loan consolidation. A Federal Consolidation Loan is a federally guaranteed education loan that you can borrow to pay off some or all of your existing federal student loans that are in their grace period or are in repayment. This refinancing option is primarily beneficial to those borrowers who have student loan debt that currently has a variable interest rate, those who have multiple loan holders of their current federal student loans and want to have a single loan to repay each month, or for borrowers who are hoping to qualify for Public Service Loan Forgiveness and currently have loans in the FFEL Program. The Federal Consolidation Loan has a fixed interest rate that is equal to the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest 1/8th percent, capped at 8.25%. These loans have a repayment period of up to 30 years, depending on your total student loan debt (which includes any of your outstanding private/institutional student loans). Consolidating your eligible federal student loan debt usually will cause you to lose any borrower benefits that may be offered by the current holder of your loans and may result in a higher interest rate on that debt. You also may lose other benefits by consolidating your loan(s). For more information about federal loan consolidation, go to the U.S. Department of Education website for consolidation at loanconsolidation.ed.gov.
Special Direct Consolidation Loans

This is a short term consolidation program available from January 2012 June 2012. Only certain borrowers are eligible for this program. Federal Direct Loan servicers are contacting eligible borrowers. For more information contact your servicer.
Identifying Your Financial Goals

How well you manage your student loans and other personal finances will influence how quickly you achieve your financial goals. Its important to set realistic goals, keeping in mind all of your financial responsibilities, and to think both about the short-term and the long-term when identifying your financial goals. Be honest with yourself about your goals and your habits. Ask yourself the questions on the next page to get a good sense of your financial situation as it is and as you hope for it to be.
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Activity Assessing Financial Goals and Habits

Goals What is your most immediate financial need? ______________________________ Where do you intend to live, and whats the average cost of living there? _____________________________________________________ Do you need or want to buy a new car? ____________________________________ What kind of career trajectory do you hope for/anticipate? ___________________ When do you want to buy a house? _______________________________________ Do you have or intend to have a family? When? How large? __________________ Do you want the flexibility to invest or reinvest in an entrepreneurial endeavor? _______________________________________________ When do you hope to retire? _____________________________________________ What lifestyle do you hope to have in retirement? ___________________________ What will it cost for you to achieve your goals? _____________________________ Habits How do you distinguish between what you need and what you want? ___________________________________________________________ Are you a spender or a saver? ________________________________________ How many credit cards do you have? ______________________________________ Do you pay your credit card bill(s) in full every month? _______________________
If not, do you pay more than the minimum monthly payment every month? _________
How many nights a week do you typically dine out? __________________________ When, where and how often do you hope to travel for recreation? ______________ Are your hobbies expensive? _____________________________________________ What will it cost to satisfy your habits? ____________________________________
Use the answers to these questions to help you form a strategy to manage repaying your student loans within the context of your spending plan and the repayment plans that are available. Your ability to repay your student loans is directly tied to your lifestyle and financial habits. If your answers above indicate youll need more cash in hand, youll need a way to stretch your resources. Thats why its good to keep in mind that choosing a repayment plan that requires a smaller payment each month gives you the flexibility to use the surplus funds to pay for other things that may be important to you.
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If financial flexibility will help you reach your goals, then either the Extended Repayment Plan or the Income-Based Repayment (IBR) Plan may be the right option for you. Of course, lower payments also come at the cost of more interest paid over the entire repayment period, so its important to weigh the benefits of doing so. Regardless of the repayment plan you choose, its important to develop a monthly spending plan and stick to it. Be smart with your money. And remember, you always have the option to pay more on your student loan debt during those months you have the money to do so, regardless of the repayment plan you choose.
Establishing Your Spending Plan

Your Financial Road Map
Your personal spending plan is like a road map. It tells you who you are financially, where you are currently, and where you want to be. A personal spending plan is an important component of any financial strategy. In fact, the first step that a financial planner typically would take in advising you about your investments and finances is to help you develop a comprehensive personal spending plan. Taking time to carefully estimate your income and track your expenses will help you determine which repayment plan is best for you. There are four basic steps involved in developing your spending plan once you know your financial goals:
1. Calculate your monthly income and other financial resources 2. Estimate your expenses including savings and investment needs 3. Do the math (subtract your expenses from your resources) 4. Make adjustments as necessary to eliminate any surplus or deficit
You can use the spending plan worksheet on the next page to help get you started. It also will help you determine what you can afford to pay each month on your student loan debt.
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Where Are You Headed?

Where is the next stage of your life taking you? Its important to have a handle on what you can reasonably expect for a starting salary and to understand the typical increases that come with each level of experience. If you dont already know your starting salary, there are some general websites that provide estimates for entry-level salaries across a broad range of professions, including: Salary.com Monster.com Jobweb.com Payscale.com Careerbuilder.com There are also websites geared more toward specific professions: Dentistry adea.org ada.org Law abanet.org nalp.org equaljusticeworks.org careers.findlaw.com lawjobs.com legalemploy.com Medicine aamc.org ama-assn.org physicianrecruiting.com healthjobusa.com
Check out the spending planner tools at AccessGroup.Org/ Calculators
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Activity _ Your Out-of-School Spending Plan Worksheet

Household Income (after taxes)
Your Monthly Salary/Wages Spouses Monthly Salary/Wages Other Monthly Income Total Monthly Income ____________ ____________ ____________ ____________ Other Living Expenses Clothing Dry Cleaning Laundry Personal Care (Hair Cuts, Cosmetics, etc.) Recreation Entertainment Subscriptions Books Music Household Goods/Furnishings Gifts/Donations Credit Card Payments ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________
Student Loan Payments (per month)

Your Student Loan Payments Spouses Student Loan Payments Total Monthly Loan Payments ____________ ____________ ____________
Living Expenses (per month)

Housing Rent or Mortgage Utilities Electric/Gas/Oil/Water/Sewer Telephone Cable Internet Service Other Food Groceries Dining Out Other Transportation Car Payment Car Maintenance/Repair Gas for Car Parking Public Transportation Taxis Other Insurance Auto Medical/Dental Disability Home/Apartment Life Other ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________
_______________________ _______________________ Other Loan Payments _______________________ _______________________ Dependent Care Expenses Travel/Vacation Other Expenses Total Living Expenses per Month Investments/Savings Retirement Contributions Childrens Education Savings Other Total Investments per Month
____________ ____________ ____________ ____________ ____________
Total Spending Plan Summary

Monthly Total Monthly Income Total Monthly Loan Payments Total Living Expenses/Month Total Investments/Month Balance ______________ ______________ ______________ ______________ ______________
Remember, your spending plan needs to balance income must equal all your expenses including your investment and savings needs. You dont want a surplus or a deficit. If you have a surplus, you have funds to allocate (perhaps paying off debt more quickly and/or investing more for the future). On the other hand, if you have a deficit, you need to find a way to eliminate it.
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Eliminating a Spending Plan Deficit

What can you do? If you have a spending plan deficit once youve done the math, you need to spend less (or earn more) each month; there is no more financial aid once youre out of school. If you dont eliminate the deficit, your total debt will only increase. You can: Reduce the spending on your lifestyle. Is this realistic? You may consider your lifestyle to be bare bones already. Reduce your investment/savings contributions. Doing so may make it more difficult to achieve your short- and long-term financial goals. Reduce the amount you pay each month on student loans by switching to a different repayment plan.
Picking the Repayment Plan Thats Best for You

Once youve identified your financial goals and worked out your personal spending plan, its time to ask what you can afford to pay each month and which repayment plan fits your habits and meets your goals. One way to put your student loan debt in perspective is to consider that a basic tenet of personal finance and the American lifestyle is that consumers should always match the life expectancy of an asset with the attending liability associated with that asset. For example, its reasonable to extend the term of a mortgage to 30 years because its expected that a home will outlast the debt. Conversely, one would not extend the loan term of a car to 30 years because youd likely still be repaying that debt long after the car no longer worked. A five- to seven-year term on an auto loan is more reasonable given the current life span of most automobiles. Although the debt you incurred to acquire an education is more difficult to quantify, education provides benefits throughout a lifetime at least a professional lifetime. And that can be expected to last at least 30 to 40 years following graduation. As such, repayment of education debt can be viewed as being more akin to that of the mortgage on a home. Therefore, it may not be unreasonable for a borrower to consider taking 25 to 30 years to repay that debt if he or she so chooses.
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Below is an example of how extending repayment beyond the Standard Repayment Plans 10-year term may be beneficial in managing your student loans. It demonstrates how you can increase your monthly cash flow for other purposes.
Affordable Monthly Loan Payment

Student loan indebtedness is growing faster than average starting salaries for many graduates. As such, many borrowers may find repaying their student loan debt unaffordable using the Standard Repayment Plan. Although this plan results in the lowest amount of interest paid, it also requires the highest initial monthly loan payment: a payment that many borrowers may not be able to afford given their other monthly living expenses/needs. Extending repayment to 25 years using the Extended Repayment Plan can reduce the monthly payment by as much as 40% or more on Federal Stafford Loans or Federal Direct Subsidized and Unsubsidized Loans having a fixed interest rate of 6.8%, as demonstrated in the chart below. The reduction in monthly payment could be even larger, at least initially, using the IBR plan, depending on your households adjusted gross income and household size.
Federal Stafford Loan, Federal Direct Subsidized Loan and/or Federal Direct Unsubsidized Loan
Monthly Payment 6.80% Loan Principal $10,000 $25,000 $50,000 $60,000 $75,000 $100,000 $125,000 $150,000 $175,000 $200,000 Standard Plan 10 Years $115.08 $287.70 $575.40 $690.48 $863.10 $1,150.80 $1,438.50 $1,726.20 $2,013.91 $2,301.61 Extended Plan 25 Years $69.41 $173.52 $347.04 $416.44 $520.55 $694.07 $867.59 $1,041.11 $1,214.63 $1,388.14 Difference ($) $45.67 $114.18 $228.37 $274.04 $342.55 $456.73 $570.91 $685.10 $799.28 $913.46 Difference (%) 40% 40% 40% 40% 40% 40% 40% 40% 40% 40%
For example, a borrower owing $60,000 in Federal Stafford Loans or Federal Direct Subsidized and Unsubsidized Loans would be required to pay $690.48 per month for 10 years using the Standard Repayment Plan (see shaded line in chart shown above). The minimum monthly loan payment would be reduced to $416.44 using the Extended Repayment Plan over 25 years. This is a decrease of $274.04 per month and might mean the difference between this borrower being able to afford his or her basic living expenses or not, being able to live alone versus having to live with a roommate, paying for gas and other utilities or not, or paying for health insurance or being uninsured.
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In general, extending repayment of a loan will increase the amount of interest paid on that debt. And on the face of it, paying more interest would appear to be a negative financial outcome. However, the increase in interest paid does not necessarily mean an equal loss of purchasing power over time due to the time value of money. Over time, the purchasing power of a dollar declines due to inflation. The higher the rate of inflation, the faster that rate of decline. In fact, if the rate of inflation is high enough, the loss of purchasing power may actually be less for a stream of payments made over a longer period of time than when the rate of inflation is low, even if more total interest is paid.
Ability to Invest
You also may benefit financially by choosing Extended Repayment even though you could afford to make payments under the Standard 10-year fixed plan. With lower monthly payments under the Extended Repayment plan, you would have more money for investments, such as the purchase of a home or investing in a tax-deferred retirement account. With the purchase of a home (assuming you could not otherwise afford this purchase without the added cash flow created by extending repayment), you likely could reduce your federal income tax liability because the mortgage interest could be itemized as a tax deduction. The home also represents an asset that hopefully would gain in value over time.
Payments 1 120
(First 10 Years)
Standard Repayment Plan

Total months in repayment Total loan amount owed Loan interest rate Monthly loan payment Monthly investment contribution Annual rate of return on investment Total assets earned at end of 120 months
(Years 10 25)
Extended Repayment Plan

300 $60,000 6.8% $416 $274 8% $43,136
120 $60,000 6.8% $690 $0 8% $0
Payments 121 300

Monthly loan payment Monthly investment contribution Total assets earned at end of 300 months @ 8% Total cash flow out ($690 x 300 months) Net gain Net benefit of Extended Repayment Plan $0 $690 $212,536 $207,000 $5,536 $416 $274 $237,461 $207,000 $37,461 $31,925
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In the case of investing for retirement, you would be better off financially extending loan repayment over 25 years as long as the average annual rate of return on the retirement account was greater than the interest rate of the loans being repaid more slowly using Extended Repayment. The example shown on the previous page illustrates the potential financial benefit of choosing the Extended Repayment plan over the Standard 10-year plan in repaying your eligible federal loans (with a fixed interest rate of 6.8%) and investing the difference in monthly loan payments required under the two plans. As the example illustrates, youd have $31,925 more in assets (in 25 years) if you used the Extended plan and the $274 difference in monthly loan payments was invested every month from the beginning of loan repayment. Had you paid off the $60,000 loan debt using the Standard plan, youd be debt-free sooner, but would have less invested for the future. The option thats best for you will depend on your financial goals and what you can afford to pay each month. The following chart provides an example of what your estimated monthly payments would be under the Standard 10-year, Extended (fixed), and IBR plans.
Monthly Payment Comparisons

Federal Student Loan Debt $60,000 $100,000 $150,000
Standard Repayment
Fixed payment @ 6.8% for 10 yrs.
$690
$1,151
$1,726
Extended Repayment
Fixed payment @ 6.8% for 25 yrs.
$416
$694
$1,041
IBR Repayment
Fixed payment @ 6.8% up to 25 yrs. Adjusted gross income = $60,000, Household size = 1 in 2012
$541
$541
$541
You should create your own version of the spreadsheet illustrated above to help you decide which repayment plan will work best for you.
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Activity Comparing Payments

The following activity provides a sample worksheet you can use to compare your monthly loan payments based on the various repayment plans.
Monthly Loan Payment Loan Type Standard Repayment Plan* $ $ $ $ $ $ $ $ $ $ $ $ $ Graduated Repayment Plan* $ $ $ $ $ Extended Repayment Plan*
(fixed payment option)
IncomeSensitive Repayment Plan** $ $ $ $ $ $ $ $ $ $
IncomeBased Repayment Plan* $ $ $ $ $
IncomeContingent Repayment Plan***
Stafford Grad PLUS Other Other
TOTAL $ Monthly Payment Repayment Period TOTAL $ Interest Paid TOTAL $ Paid
years $ $
years $ $
years $ $
years $ $
years $ $
years
Repayment options available for: *Federal Family Education Loan Program or Federal Direct Loan Program **Federal Family Education Loan Program only ***Federal Direct Loan Program only
The best repayment plan for me is:
___________________________________________________________ ___________________________________________________________
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Understanding Your Rights and Responsibilities

As a borrower, you have both rights and responsibilities. Among them are the responsibility to repay your loan and the right to postpone repayment, if needed. The following section explores this topic more fully, beginning with deferment and forbearance.
Deferment and Forbearance

There are circumstances for which you can request smaller payments or even a temporary cessation of payments. For instance, you may be in a medical residency or perhaps you are suddenly unemployed; in cases such as those, you may be granted either a deferment or forbearance.
Federal Loan Deferment

A deferment is a temporary period during which no payments are made. While you are in deferment, the government pays the interest on your Federal Subsidized Stafford Loans and/or your Federal Direct Subsidized Loans, but interest accrues on your Federal Unsubsidized Stafford Loans, your Federal Direct Unsubsidized Loans and your Federal PLUS Loans. However, you do not have to pay the interest while in deferment; you can allow the accrued interest to be capitalized (added to the principal balance of your loan) when you leave deferment. The time period during which a loan is in a federal deferment extends the repayment period by the number of months in deferment. The following five types of deferments are available for individuals who first borrowed a FFEL Program loan on or after July 1, 1993. More details on each is provided following the listing. Education-Related Economic Hardship Unemployment Military Service Post-Active Duty
Contact your loan servicer to apply for a deferment or forbearance.
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Education-Related Deferments
Graduate Fellowship Deferment This deferment covers study under an eligible graduate fellowship program. You must provide a written statement from an authorized official in the fellowship program. This statement must indicate your anticipated completion date in the program and certify, among other points, that you will be engaged in full-time study. In-School Deferment This deferment covers both full-time and half-time study at a school eligible to participate in a Title IV program. Deferment is granted through the anticipated graduation date. To qualify for an In-School Deferment, you must be one of the following: Enrolled at least half-time and you dont have an outstanding balance on a FFEL Program loan disbursed before July 1, 1987. Enrolled as a full-time student and you have an outstanding balance from a FFEL Program loan disbursed before July 1, 1987. Parent PLUS Loan Deferment Effective October 1, 2007, parent borrowers can request to defer repayment on Parent PLUS loans until six months after their child fails to carry at least one-half the normal fulltime course load. Grad PLUS Loan Deferment and Forbearance Although Grad PLUS Loans enter repayment as soon as they are fully disbursed, your loan servicer may automatically place your Grad PLUS Loan in an In-School Deferment provided you are enrolled at least half-time in an eligible program of study. This will allow you to postpone repayment of the Grad PLUS Loan while you are enrolled in school at least half-time. Once your enrollment status drops below half-time status, you may be eligible to receive a deferment or forbearance on your Grad PLUS Loan(s) if you need to continue to postpone repayment. Grad PLUS Loans first disbursed on or after July 1, 2008, are eligible for an automatic 6-month postenrollment deferment. You must contact your loan servicer to opt-out of this automatic deferment. For Grad PLUS Loans first disbursed prior to July 1, 2008, you may request a forbearance that allows you to postpone repayment for six months. The post-enrollment deferment and forbearance options allow you to begin repaying your Grad PLUS Loan(s) at the same time as your Federal Stafford Loan(s). Rehabilitation Training Program Deferment This deferment covers participation in a rehabilitation training program. To qualify, you must provide written certification from a recognized rehabilitation agency that you are receiving (or are scheduled to receive) rehabilitation training services and that the training program will, among other things, require a substantial commitment of time and effort that would normally prevent you from engaging in full-time employment.
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Economic Hardship Deferment

This deferment allows borrowers to defer payments on their federal loans for up to one year at a time for up to three years. Eligibility typically is based on your households adjusted gross income, household size, and the poverty guideline for your household size and state of residence. You may be required to provide verification of your AGI and household size.
Unemployment Deferment
This deferment is available if you are conscientiously seeking, but are unable to find, fulltime employment in the U.S. defined as at least 30 hours/week for at least three months. You are eligible for this deferment regardless of whether you were previously employed and regardless of the circumstances under which any prior employment ended. However, you are not eligible if youre unwilling to consider positions for which you feel overqualified. If you obtain an unemployment deferment, you are expected to notify your lender promptly when you obtain full-time employment. An unemployment deferment can be granted in periods of six months each, with a three-year maximum.
Military Service Deferment

The deferment applies only to periods during which you are serving on active duty or performing qualifying National Guard duty during a war, other military operation or national emergency. As a result, not all active duty military personnel are eligible. Effective October 1, 2007 the military service deferment is available for most federal loans. The deferment is also extended for 180 days following demobilization. This deferment must be granted on each individual eligible loan. Documentation establishing eligible active duty service may include a copy of your military orders or a written statement from your commanding officer or personnel officer that you are serving on active duty.
Post-Active Duty Student Deferment

As of October 1, 2007, this deferment is allowed for the 13-month period after completing military service. Eligible are National Guard or other Armed Forces reserve (current or retired) members called to active duty. Active duty is defined as full-time duty in the active military service of the U.S., including State duty for members of the National Guard. This does not include active duty for training or attendance at a service school. Contact your loan servicer to determine whether you qualify for any of these deferments and for information on how to apply for them. You may also refer to the U.S. Department of Educations Student Aid on the Web at studentaid.ed.gov for the most current information available about all federal loan deferments. If you have an outstanding FFEL Program loan prior to July 1, 1993 or if you are a FDL Program borrower with an outstanding balance on a FFEL Program loan first disbursed before July 1, 1993, when you received your first FDL Program loan you should contract your servicer to determine whether or not you are eligible for additional deferments.
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Federal Loan Forbearance

Forbearance can help you meet your loan repayment obligations by allowing a temporary cessation of payments, an extension of the time available for making payments, or smaller payments than previously scheduled. There are several types of forbearance on federal loans. Some types of forbearance are mandatory (such as for medical or dental residency) and your loan servicer must apply the forbearance upon your request, but others are granted at the loan servicers discretion. Your loan servicer may grant a forbearance only if they believe that you intend to repay your federal loans, but that you are currently unable to make payments due to poor health or other acceptable reasons. A forbearance can be given for up to one year at a time. Contact your loan servicer for more information and to obtain any needed forms to apply for a forbearance.
Will you be in a medical or dental residency? If so, you may be eligible to postpone loan repayment during the entire residency period. Contact your loan servicer for more information.
Loan Repayment Assistance and Loan Forgiveness Programs

A portion of your eligible federal student loan(s) may be forgiven under certain conditions based on your employment, school of attendance, or jurisdiction where you live. For example: Public Service Loan Forgiveness (PSLF) allows for loan cancellation on Federal Direct Loans after 120 months of working full-time in an eligible public service position (typically federal, state, local or tribal government position or working for a 501(c)(3) non-profit organization) in which qualifying monthly payments have been made using either IBR, ICR, or the monthly amount paid must at least equal the amount required initially under the Standard 10-year Repayment Plan. FFEL Program borrowers are permitted to consolidate their eligible federal student loans in the FDL Program to take advantage of this program. Borrowers who believe they are working in an eligible position should complete the PSLF Employer Certification Package. Full-time teachers working for five consecutive complete academic years in a qualifying elementary or secondary school serving students from low-income families may be eligible for partial loan forgiveness. Contact your loan holder/servicer for more information. Also be aware that loan forgiveness and repayment assistance programs may be available based on your income level and/or employment. One of more of the following typically sponsors these programs: the school you attended, your employer, or the state in which you reside.
PSLF Employment Certification Package can be found here:

Department of Education: studentaid.ed.gov/publicservice
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Tax Benefits Available to Borrowers

You may be eligible to deduct a portion of the student loan interest you pay on your federal income tax return. Student loan interest is defined as the interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments. There is a maximum amount of interest paid each year that can be deducted and your eligibility for this deduction is based on your adjusted gross income and that of your spouse, if married, and you file a joint federal tax return. Refer to IRS Publication 970 for more detailed information about tax benefits for education or consult a tax advisor.
Discharge of Your Loans

In most cases, Federal Stafford Loans, Federal Direct Subsidized and Unsubsidized Loans and Federal PLUS Loans will be discharged in full if you die or become totally and permanently disabled. In either case, documentation must be submitted to the loan servicer. Discharge also will occur if: you cant complete your course of study because your school closed, your school falsely certified your loan eligibility, or, effective July 1, 2006, if a loan was falsely certified in your name as a result of identity theft. Discharge may not be available for private student loans youve borrowed. Check your promissory note or contact the loan servicer for discharge provisions relative to other loans you may have borrowed.
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Activity A Quick Quiz

Do You Know the Consequences of Default?
(Circle the letter corresponding to the BEST answer)
1. Which of the following could occur if you default on your federal student loans?
a) The holder of your loan may declare the entire unpaid balance, including interest, immediately due and payable b) You could be required to pay all charges and other costs permitted by law (including reasonable attorneys fees) for the collection of your loan c) The holder of your loan and/or agency that guaranteed your loan may report the default to one or all three national authorized consumer reporting agencies d) The holder of your loan and/or the federal government may take legal action against you e) The holder of your loan and/or agency that guaranteed your loan may report the default to the school you attended when you received the loan f) All of the above
2. Which of the following could also occur if you default on your federal student loans?
a) You may be unable to receive future assistance from the federal student aid programs, including PLUS Loans on behalf of your dependent children b) You may become ineligible for various repayment options, deferments, and other benefits c) The holder of your loan may assign the promissory note to a guaranty agency, at which time all amounts due will be payable to that agency d) Your wages may be subject to garnishment e) State and federal income tax refunds may be subject to IRS offset and withheld by the federal government f) All of the above
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Avoid Default!
The correct answers to the quiz on the previous page were: f) All of the above in both cases. Its important to remember that if youre late making a loan payment, it will be reported to the national consumer reporting agencies and that information will remain on your credit report for at least seven years. This will make borrowing money for other purposes in the future difficult. Default is avoidable. Taking the following steps will go a long way toward helping you successfully repay your loans and avoid default: Understand and comply with all terms and conditions of your loan(s). Make certain that your loan payment(s) arrive at the loan servicer by the due date. Contact your loan servicer if: youll have trouble making a payment by the due date; your address, phone number or name changes; your eligibility for a deferment or forbearance changes; or anything else changes regarding your circumstances that affects repayment of your student loans. If you do default on a federal student loan, youll be subject to federal delinquent debt collection procedures and possible litigation.
Keeping Good Financial Records

An important element of successful loan repayment is good record-keeping. Maintaining accurate, well-organized records of your financial activities is an important part of managing your loans and achieving your financial goals.
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Know Your Loans

Its important to know the following information about each loan youve borrowed: Loan name (type) Loan period (date borrowed/academic period) Original lender name, address and phone number Guarantor name, address and phone number (if applicable) Loan holder name, address and phone number (if different from original lender) Loan servicer name, address and phone number (if applicable) Amount borrowed (including fees) Interest rate Monthly loan payment amount Length of repayment period First scheduled loan payment due date Final estimated loan payment date Estimate of total finance charges
Check out the Loan Ledger at AccessGroup.Org. It may be a useful tool for keeping track of your loans.
Set Up Your Record-Keeping System

Develop a system that will work for you. There are many books and software products on personal finance to guide you in setting up a successful record- keeping system. You can use individual file folders, portfolios, three-ring binders, manila envelopes, etc. Whatever system you choose, however, remember the three Ss. Your system should be: Simple make it simple to use Sustainable make it a system youll maintain over the long term Secure your records need to be safe from loss or damage due to fire or theft
Documents to Keep
Keep copies of the following loan-related documents as part of your financial records: Master Promissory Note Disclosure statements Notifications of loan transfer (lender change) and/or change in servicer Repayment schedule Lender/loan holder/servicer correspondence (including e-mails) Deferment/forbearance requests
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Where to Find Information About Your Federal Loans

You can obtain information about most of your federal student loans from the National Student Loan Data System (NSLDS) at: Toll-free telephone: 800-4FEDAID (1-800-433-3243) Website: www.nslds.ed.gov
Summary
Got all that?
Weve covered a lot of information, but youre going to be better for it. To review, we worked on six key elements that can go a long way in helping you to select the best repayment plan for your financial situation:
1. Understanding the repayment terms of your federal loans 2. Identifying your short- and long-term goals 3. Establishing your personal spending plan 4. Picking the repayment plan thats right for you 5. Understanding your rights and responsibilities as a borrower 6. Keeping good financial records
Be sure to consider all of your financial and life responsibilities when choosing the repayment plan that works best. Remember to think about your short- and long-term goals, and dont forget the little things like staying on top of your monthly spending plan. Student loan repayment doesnt have to be overwhelming. Mix in some discipline with good planning and youll be ahead of the game.
Now get out there and go after your dreams.
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Office of the Ombudsman U.S. Department of Education

This office acts as a mediator between you (the borrower) and the lender/loan holder/servicer to settle disputes that arise regarding your loans. For assistance or for more information: Visit: www.ombudsman.ed.gov Call: 877-557-2575 (toll-free) Fax: 202-275-0549 Write to: U.S. Department of Education FSA Ombudsman 830 First Street, NE, Fourth Floor Washington, DC 20202-5144
Tips for Managing Loan Repayment

Plan for repayment. Understand your loans. Organize and maintain good loan records. Develop and follow an affordable spending plan. Select the repayment plan thats best for you. Make your loan payments by the due date. Contact your loan servicer immediately if youre having trouble making a payment. Request deferments or forbearance as needed. Read all mail from your loan holder/servicer. Promptly report changes in name, address, phone number or eligibility for deferment/forbearance. Consume with cash, not credit cards. Identify your financial goals and review/revise them as your circumstances change. Save something (even if only $20) every month for emergencies. Pay all your bills on time every month. Limit the number of credit cards you have. Pay credit card balances in full every month. Charge only what you know you can afford to repay when the bill arrives.
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Terms You Should Know

Accrued Interest Interest that accumulates on a loan and is payable by you or, in the case of federal subsidized loans, by the federal government during in-school, grace and approved deferment periods. Amortization Paying a loan over time through periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest. Annual Percentage Rate (APR) A percentage calculation that reflects the total cost of a loan (interest plus all fees) on an annual basis. Capitalization The process of adding accrued interest and/or fees to the principal balance of a loan. Interest then accrues on the new principal balance. Consumer Reporting Agency An agency that compiles, maintains and distributes credit and personal information to authorized parties. This information may include your payment habits, number of credit accounts, balances of those accounts, place of employment, length of employment, and records of credit transactions. Lenders check with consumer reporting agencies to learn whether a potential customer seeking a loan is likely to repay, based on the way other obligations have been handled in the past. Credit Report A summary of your credit history. It is maintained by an authorized consumer reporting agency and sent to authorized parties, when requested. Credit reports include information such as current and recent addresses, employer information, payment performance for at least the past seven years, type of debt you have and the lending institution for each account, available credit and current balances. Credit Scoring A quick and consistent method of determining the likelihood that you will repay a future debt on time. It is an evaluation tool that predicts how well you will manage credit, relative to other borrowers, based on your past credit performance. Some of the factors used to calculate your credit score include promptness in paying bills, the amount owed on accounts, the percent utilization of your available credit card limit, the age of your accounts and the frequency of new accounts opened in the past 12 months. Default The failure to repay a loan as agreed or to meet other terms of the promissory note. Default will negatively
affect your credit rating.

Deferment A period during which the repayment of the principal amount of the loan is suspended as a result of your meeting one of the requirements established by law and/or contained in the promissory note. During this period, you may or may not have to pay interest on the loan. Deferred Interest Accrued interest that you do not have to pay until a later date. Such deferred (accrued) interest may be capitalized. Delinquency A period that begins on the day after the due date of a payment when you fail to make the equivalent of one full payment. Disclosure Statement A statement of the actual loan costs, including the interest rate and any additional fees, which is presented to you at the time the loan is made (see also, Repayment Disclosure Statement). Exit Counseling A mandatory session for federal student loan borrowers where information is presented prior to graduation or following a drop in enrollment status to less than half time. Information presented includes loan repayment and debt management strategies. Extended Repayment A loan repayment option that allows you to repay your loans over a maximum of 25 years, with either equal or graduated payments. Available only to those who first borrowed federal loans on or after October 7, 1998, and have a total eligible federal loan debt exceeding $30,000.
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Federal Consolidation Loan A federal loan program that allows most federal education loans to be refinanced into a single new loan, often with a longer repayment term and, thereby, a lower monthly payment. This will also increase the total amount of interest paid. Federal Direct Loan There are two types, subsidized and unsubsidized Federal Direct Subsidized Loans are based on need, and the interest is paid by the federal government. As of July 1, 2012, graduate and professional students are only eligible for unsubsidized loans which are not based on need, and begin accruing interest at disbursement. Federal Direct PLUS Loan It is an unsubsidized federal education loan. Parents of undergraduate students can borrow the PLUS loan on behalf of their undergraduate child, while graduate and professional students can borrow it themselves. An amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year. There are no aggregate borrowing limits in this program. Federal Family Education Loan (FFEL) Program A federal program of education loans, including the Federal Stafford Loan, the Federal PLUS Loan and the Federal Consolidation Loan. These loans are regulated and guaranteed by the U.S. Department of Education but financed by private lenders/financial institutions. Federal Perkins Loan A need-based federal student loan, which is issued and administered by a participating school. Federal PLUS Loan The Federal PLUS Loan Program is an unsubsidized federal education loan that parents of dependent undergraduate students can borrow on behalf of their undergraduate child. Effective for Federal PLUS Loans first disbursed on or after July 1, 2006, graduate and professional students also are eligible borrowers. An amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year. The Federal PLUS Loan has a fixed interest rate of 8.5% for loans with a first disbursement on or after July 1, 2006 in the FFEL Program. The Federal Direct PLUS Loan has a fixed interest rate of 7.9% for loans with a first disbursement on or after July 1, 2006. There are no aggregate borrowing limits in this program. You cannot have adverse credit in order to borrow a Federal PLUS Loan. If you do have adverse credit, you can provide an endorser who does not have adverse credit in an effort to obtain the loan. Federal Stafford Loan A federal education loan issued by a participating lender. There are two types, subsidized and unsubsidized. Federal Subsidized Stafford Loans are based on need, and the interest is paid by the federal government while you are in school, during the grace period and during approved deferment periods. Federal Unsubsidized Stafford Loans are not based on need, and you are responsible for paying all the interest that accrues as soon as funds are disbursed. Financial Aid Office The office at your school that determines eligibility for financial aid (including federal student loans) based on federal formulas and cost-of-attendance figures. The schools financial aid administrators can provide information about which lender to choose, how to apply for loans and getting loan requests certified. They also are a good resource for information about other financial aid matters such as scholarships and work study programs. Forbearance An agreement between the loan servicer and you to accept a temporary suspension of scheduled loan payments, smaller payments than were previously scheduled or an extension of time for making payments. Forbearance may be given for circumstances not covered by deferment that adversely affect your ability to meet loan payment obligations, such as economic hardship. Garnishment of Wages The deduction of a portion of your paycheck by your employer, with or without your consent. A lender/holder or the government may take this action to force repayment of a loan that is in default. Grace Period This period begins the day after you cease to be enrolled at least half-time at an eligible school and continues until the loan repayment period begins. No payments are required during the grace period and interest continues to be subsidized on any subsidized loans during this period. Graduated Repayment A student loan repayment option in which monthly payments are lower at the beginning of repayment and increase in steps during the repayment period.
37
Guaranty Agency (Guarantor) A state agency or private, nonprofit institution or organization that insures lenders/holders against losses due to default, death, disability or bankruptcy. Holder The lender, institution or agency that originated the loan and holds its legal title; or a lender or secondary market that purchased the loan from the original holder. Income-Based Repayment (IBR) A federal student loan repayment option for those who are experiencing partial financial hardship. Income-Contingent Repayment (ICR) A student loan repayment option that is available for FDL Program loans. It is based on your income and total federal student loan debt. Income-Sensitive Repayment (ISR) A student loan repayment option that is available for FFEL Program loans. It is based on your income and total federal student loan debt. Interest A charge for the use of money. Interest is calculated as a percentage of the loan principal. The interest rate charged can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case, it changes periodically. The percentage rate may be tied to one of several financial indexes such as the Prime Rate, LIBOR or U.S. Treasury Bills. Lender The bank, savings and loan, credit union or other approved entity from which you borrow. Loan Period The academic year or portion thereof for which you are enrolled and you are seeking one or more loans. Master Promissory Note (MPN) The legally binding contract between you and the lender of federal education loans. By signing a MPN, you agree to all terms and conditions, including the responsibility to repay all borrowed funds along with any interest and fees that are charged. Unlike other promissory notes where only one loan can be borrowed per signed note, the MPN allows you to borrow multiple federal loans using a single note (for up to 10 years) for the respective loan type from the specified lender. Negative Amortization This occurs when the amount of your monthly loan payment is less than the amount of interest that accrued on the loan during the billing period. When this occurs, the unpaid interest may be capitalized (added to the principal balance) at some point. This increases your total debt and the amount you must repay. Origination Fee A loan processing fee that is payable to the lender or loan originator; in the case of federal loans, the fee is paid to the federal government. It is calculated as a percentage of the principal amount borrowed and is typically charged to you by the lender. This fee is normally deducted from the amount of the loan disbursement. Partial Financial Hardship This is an eligibility requirement for the Income-Based Repayment (IBR) Plan. Youre experiencing partial financial hardship when your annual loan payment on eligible federal loans under the Standard 10-year Repayment Plan at the time you enter repayment exceeds 15% of the amount of your households adjusted gross income that exceeds 150% of the U.S Department of Health and Human Services (HHS) poverty guideline for your household size and state of residence. Principal Balance The outstanding amount of the loan. Generally, as the loan is repaid, a portion of each payment goes to accrued interest and a portion reduces the outstanding principal balance. The principal balance can increase when accrued interest and/or fees are capitalized. Promissory Note A legal document signed by you when obtaining a loan. It lists the conditions under which the loan is made and the terms under which you agree to repay the loan (see Master Promissory Note). Repayment Disclosure Statement A statement of the loans repayment terms that is sent to you by the loan holder/servicer prior to the due date of the first payment of the loan.
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Repayment Period The length of time you have to repay a loan. The start date and length of the repayment period will be defined in the loan agreement/repayment disclosure statement. The length of the repayment period may differ by loan type and/or by the repayment option you choose. Repayment Schedule A plan which sets forth the principal and interest due in each installment, the maximum number of payments allowed to pay the loan in full, the current interest rate and the due dates of the first and subsequent payments. Secondary Market A lender, agency, or institution that buys loans from the originating lender or other holder. Lenders sell loans to secondary markets to replenish and generate capital for their continuing operations, including making additional loans. Terms and conditions of the loan do not change when it is sold. Servicer An organization that handles billing, collections, deferments, customer inquiries and other loan transactions for the lender/holder. Standard Repayment A student loan repayment option that allows you to pay an equal or level amount each month. All payments include both interest and principal. Terms The specific conditions of a loan, including the requirements governing receipt and repayment of a loan. It is often used more specifically to refer to the charges for the loan, such as the interest rate and fees. U.S. Department of Education The federal agency that administers several major student aid programs, including the Federal Stafford Loan, the Federal PLUS Loan and Federal Consolidation Loan programs. The U.S. Department of Education produces, distributes and processes the Free Application for Federal Student Aid (FAFSA), which is used to determine your eligibility for federal funds. Also performs the function of lender for the Federal Direct Loan (FDL) Program.
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Your Borrower Rights and Responsibilities

The Federal Master Promissory Note (MPN), Federal PLUS Loan Application and related addendum documents contain a complete listing of your rights and responsibilities as a borrower (please refer to these documents for more information, as needed).
I understand that I have a right to:

Written information on my loan obligations and information on my rights and responsibilities as a borrower. A grace period on most federal loans and an explanation of what this means. A disclosure statement, received before I begin to repay my loan, that includes information about interest rates, fees, the balance I owe and the number of payments. Deferment of repayment for certain defined periods, if I qualify and if I request it. Forbearance, if I qualify and if I request it. Prepayment of my loan in whole or in part at any time without an early repayment penalty. A copy of my promissory note either before or at the time my loan is disbursed. Documentation that my loan is paid in full. An explanation of default and its consequences.
I understand that I am responsible for:

Repaying my loan in full even if I dont complete my academic program, I dont complete my program of study in the normal completion time for that program, Im dissatisfied with the education I received, Im unable to find employment after I graduate, or dont receive a monthly billing statement from my loan servicer. Attending exit counseling before I leave school or drop below half-time enrollment. During exit counseling, I must provide the following information: Name Permanent address E-mail address Telephone number Social Security number References Drivers license number and state of issuance Expected permanent address Address of next of kin Name and address of expected employer (if known) Notifying my school and the loan servicer if I: Move/change my address, telephone number, or e-mail address Change my name Withdraw from school or drop below half-time enrollment Transfer to another school Fail to enroll or re-enroll in school for the period for which the loan was intended Change my expected date of graduation Graduate Making monthly payments on my loan after I leave school, unless I have been granted a deferment or forbearance. Notifying the loan servicer of anything that might alter my eligibility for an existing deferment or forbearance from an authorized official in the fellowship program.
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Activity A Quick Quiz

What did you learn?
What is the legally binding contract between you and the lender of your federal loan? ______________________________ What is the interest rate on a federal loan borrowed in 2009? _________________________________________________ Who do you repay? _____________________________________________________________________________________ _________________________________________________________________ _____________________________________________
What is the grace period on federal loans?
True or False? There is a penalty for prepaying your federal loans. What are the three Ss of a good record-keeping system?
____________________________________________________
If you dont pick a repayment plan, which plan will your loan servicer select for you? _______________________________ True or False? You can select Extended Repayment with either a fixed or graduated payment. __________________________________________________________________________________
With which repayment plan should you be reasonably sure you will receive sizable salary increases? ________________________________________________________________________________
True or False? Once youre offered Income-Based Repayment, you can remain in that plan until your loan is completely repaid even if at some point you no longer have a partial financial hardship. What factors does Income-Based Repayment take into account? ___________________________________
______________________________________________
True or False? You must repay your federal student loans even if you dont get the job you want. What is the first step in picking your repayment plan? _______________________________________________________
True or False? You should avoid having to pay more interest over the term of your repayment period at all costs. ______ Which repayment plan will most quickly allow you to be free of student loan debt? ________________________________ Which repayment plan will give you the most financial flexibility while youre repaying your loans? ___________________ True or False? Theres a prepayment penalty on your federal student loans. ______________________________________ Why is it recommended that you develop your spending plan before you pick your repayment plan? ___________________________________________________________________________________
If you still have questions about repayment of your loans, contact your loan servicer.
Helpful online resources

Credit Reports:
Annualcreditreport.com Equifax.com Experian.com Ftc.gov myFICO.com Transunion.com
Federal Sites:
Loanconsolidation.ed.gov Myedaccount.com Studentaid.ed.gov Studentloans.gov
Financial Literacy and Personal Finance:

AccessGroup.Org AAMC.org Treasury.gov/resource-center/financialeducation/Pages/default.aspx Feedthepig.org Learnvest.com MyMoney.gov Mint.com
Loan Repayment Calculators:

Studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp Finaid.org/calculators/ibr.phtml Ibrinfo.org
WiseBorrower Education Series
About Access Group

For more than 25 years, Access Group, a nonprot organization, has successfully guided thousands of students, like you, through the nancial aid process. We are proud to continue our tradition of nancial literacy. Today, we are excited about and thoroughly committed to our mission of providing nancial support and solutions to help aspiring professionals achieve success.
2012 Access Group, Inc. All rights reserved. BK1028(3/12)

After You Graduate - Guide To Repaying (Ebook)

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Table of Contents

After You Graduate: A Guide to Repaying Your Student Loans

Repaying Your Student Loans:

Take time out to plan

Its not so much juggling as prioritizing

After You Graduate: A Guide to Repaying Your Student Loans

Stay with the program

Activity I Get It!

After You Graduate: A Guide to Repaying Your Student Loans

Understanding Loan Repayment Terms

Changes, Changes, Changes

The Master Promissory Note

After You Graduate: A Guide to Repaying Your Student Loans

Federal Stafford and Federal Direct Subsidized and Unsubsidized Loans

Federal PLUS Loans

After You Graduate: A Guide to Repaying Your Student Loans

Federal Stafford and Federal Direct Subsidized and Unsubsidized Loans

Federal PLUS Loans

After You Graduate: A Guide to Repaying Your Student Loans

Partners in Loan Repayment

Who You Repay

Federal Direct Loan Program

After You Graduate: A Guide to Repaying Your Student Loans

When Repayment Begins

After You Graduate: A Guide to Repaying Your Student Loans

After You Graduate: A Guide to Repaying Your Student Loans

FFEL Program Only

FDL Program Only

After You Graduate: A Guide to Repaying Your Student Loans

Maximum Repayment Period

Changes incrementally over time

Can change annually based on total gross income

Income-Based Can change annually Repayment (IBR)* based on:

After You Graduate: A Guide to Repaying Your Student Loans

Standard Repayment (FFEL and FDL)

Graduated Repayment (FFEL and FDL)

Extended Repayment (FFEL and FDL)

After You Graduate: A Guide to Repaying Your Student Loans

Income-Contingent Repayment (ICR) (FDL only)

Income-Sensitive Repayment (ISR) (FFEL only)

Income-Based Repayment (IBR) (FFEL and FDL)

After You Graduate: A Guide to Repaying Your Student Loans

A Quick Summary of Income-Based Repayment (IBR):

After You Graduate: A Guide to Repaying Your Student Loans

After You Graduate: A Guide to Repaying Your Student Loans

Federal Loan Consolidation

Special Direct Consolidation Loans

Identifying Your Financial Goals

After You Graduate: A Guide to Repaying Your Student Loans

Activity Assessing Financial Goals and Habits

After You Graduate: A Guide to Repaying Your Student Loans

Establishing Your Spending Plan

After You Graduate: A Guide to Repaying Your Student Loans

Where Are You Headed?

Check out the spending planner tools at AccessGroup.Org/ Calculators

After You Graduate: A Guide to Repaying Your Student Loans

Activity _ Your Out-of-School Spending Plan Worksheet

Student Loan Payments (per month)

Living Expenses (per month)

____________ ____________ ____________ ____________ ____________

Total Spending Plan Summary

After You Graduate: A Guide to Repaying Your Student Loans