Student Loan Exit Counseling – Direct Subsidized/Unsubsidized and PLUS Loans

Alright, how y’all doing today? Good, that’s good. My name is
Brandon and I am the Student Loan Coordinator at Stanford. Within the next
30 minutes or so I’m going to help you manage your student loans. So we’re going
to go over these six topics. After these six topics, hopefully, you know, you’ll be
a little bit more educated on your federal loans. So the first thing we’re
going to go over is terms. First term is the master promissory note. That master
promissory note, you do have to fill that out. It is a legal document. You do
have to fill it out in order to receive your student loans.
Next is the direct subsidized loans. You do have to have a financial need in
order to take out the direct subsidized loans. Also, no interest will accrue on
those on those loans while you are enrolled in school. Next is the direct
unsubsidized loan. The direct unsubsidized loan, you do not have to
show a financial need to take these out and interest will accrue while you
are in school on your direct unsubsidized loan. The next is the plus
loan. There’s two types of PLUS loans. There is the Graduate PLUS loan and then
there is the Parent PLUS loan. So with the Graduate PLUS loan- my apologies, with both loans, I apologize, with both loans-
the Graduate and the Parent PLUS loan.
It is the- it does go into repayment once it is fully dispersed or
when you do receive the loans. As far as the Parent PLUS loans, the Parent PLUS
loan it can not be transferred into the child’s name so it is the parent’s total
responsibility for the Parent PLUS loan. Next is the grace period. The grace
period is that six month period when you graduate or you withdraw or you enroll
less than half time. Your grace period will start then. Also you can make
payments while you are in your grace period so if you want to make payments
definitely definitely make payments during that time. Next is the repayment
period. Simply, the time that you have to make payments
from beginning to end. That’s pretty much the repayment period. Discretionary
income- that’s the difference between your income and the poverty guidelines
and you can go to the website ASPE to check the poverty guidelines. Next is
loan consolidation. Loan consolidation is putting multiple loans together. So if
you have multiple servicers and you do not want to deal with all of them,
consolidate, put them together, one servicer. Consolidation, it is free. A
lot of times you will be contacted by a third party and they will tell you, “Hey,
we can consolidate for two hundred, three hundred dollars,” but again it is free. You
can go to the website, consolidate your loans for free. A couple
pros about consolidation- again, one payment, one servicer. Just want to deal
with one servicer? Consolidate. More than likely you will have a lower payment
when you do consolidate and also it is a way to avoid default. Consolidation is a
way to avoid default. A couple negative things about it- when you do consolidate
you will stretch out your terms; stretch out your terms, you will pay more, pay
more interest. Another thing is that if you are in the public or if you were
looking into the public service loan forgiveness and you decide to
consolidate, any payments that you made prior to, you will lose those payments.
But we will discuss that public service loan forgiveness later. The Federal
Family Education Loan Program- this program is no longer available as of
July of 2010 but what it was? It was basically where the private lenders gave
students the loan and the government backed those student loans. Your loan
servicers- your loan servicer is pretty much that person that handles your loans,
the person that you want to make the payments to, the person that puts the
options on your account. You can go to NSLDS, you can find your servicer there,
and when you do find your servicer keep contact with your servicer. That’s the
person that you want to contact about anything in regards to your student
loans is your student loan servicer. Alright so next we’re going to talk
about some different repayment options. So the first one is the standard
repayment plan or a level- same thing standard or level repayment plan. That is that
default plan that your servicer will put you on. It is the highest payment plan
that you can be on. It is 10 years, 30 years if you consolidate. Again
consolidation stretches out your terms. Those are the eligible loans and
there’s no requirement for that plan. The next is the Graduated plan. The
Graduated plan is basically every two years your payments will increase until
the loan is paid off. It is a ten year plan. Again those are the eligible loans
and you do have to request this plan from your student loan servicer. Next is
the Extended repayment plan. The Extended repayment plan can be either fixed or
graduated. Again, payments increase every two years. It is a 25 year repayment plan
and those are the eligible loans. And you do have to have $30,000 or more in order
to enroll in that Extended repayment plan. Alright so these are the income-
driven repayment plans. There’s the REPAYE, there’s the PAYE,
there’s the IBR, and there’s the Income Contingent. So the first one is the
Revised Pay as You Earn or “REPAYE.” It is based off 10% of your discretionary
income. Now the repayment terms are 20 years if you have undergraduate loans. If you
have undergrad and grad loans it is- or just graduate loans- it is 25 years. After
those years the loan may be forgiven and it may be taxed. A reason I say maybe
is because you never know what the Department of Education is going to do
with student loans. Those are the eligible loans and you do have to recertify for
your income-driven repayment plans. All of them you have to recertify yearly.
What that means is that you have to send in your proof of income and you do have
to send in your family size and based on that information they will give you a
monthly payment. Also for your REPAYE plan for
the first three years the government will satisfy the interest of that accrues
on your subsidized loans. After those three years the government will satisfy
half of the interest that accrues. As far as your unsubsidized loans, while you are
under plan half of your interest will be satisfied. The next plan is the PAYE. It
goes off of 10% of your discretionary income. 20 years after that it may be
forgiven, may be taxed. Those are the eligible loans and again you do have to recertify and the government will satisfy for the first three years the
interest on your subsidized. As far as the unsubsidized, you are responsible.
Again after those three years you’re responsible for the interest on the
subsidized as well. Next, Income-Based. Income-Based repayment plan- it goes off
of fifteen percent or ten percent based on when you took out your loan. Also depending
on when you took out the loan, it can either be a twenty-five year or twenty year
repayment plan. Again it can be forgiven or taxed. Those are the eligible loans
and as you can see it does include the federal family education
loan program loan. And again you do have to recertify and the government will
satisfy the interest for the first three years on the subsidized loan. Again
you’re responsible for the unsubsidized interest. And then the last is the Income-Contingent where it goes off of 20% of your discretionary income. Again it’s a
25 year term and then those are the eligible loans. And this is the only plan-
this is the only income term repayment plan that allows for the Parent PLUS
loan. But that Parent PLUS loan has to be consolidated in order for it to qualify
for the Income Contingent repayment plan. That has to be consolidated. And you are
solely responsible for all of the interest that accrues on the Income
Contingent repayment plan. Alright so this is just an example. I’ll just go
over a couple of them. The first one- $10,000. If you’ve got a $10,000 loan, your
monthly payment would be $111, for a total payment altogether for
$13,322. Next would be the Graduated plan. Your payments will be between $63 and $193.
Again, every two years the payments will increase for a total payment of $14,212. And then again, it’s not applicable for the extended because you do have to have
$30,000. Also the $50,000 plan. If you- if you were on the Standard plan, $555
for a month. Total would be $66, 612. The graduated difference between- the payments will be between $317 and $952 for a total of the $71,060. And if you were on
the extended plan and if it was a fixed payment, because again it gets extended
can be either fixed or graduated, if you were on the extended plan the monthly
payment would be $322 for a total payment of $96,645. And and then here is the
income-driven repayment plan. So the income- driven repayment plans, they’re based off
a couple of factors. They’re based off of your family size, they’re based off of
your income, they’re based off of if you have any additional student loan debt,
and they’re also based off if you are supporting anyone more than 50% in your
household. So those are the factors that are included with the income-driven
repayment plans. So here’s an example. This example is just for presentation
purposes only. I mean things are going to change,
things may change, more than likely will change in your lifetime but this is just
a constant so let’s go through a couple of them. For the REPAYE plans initial payment
would be $143, final payment $606. Time of repayment 22, 22-23 years. Total payment
$90,000. No forgiveness amount. Next is the PAYE. Again the same payment $143, final
payment $507. 20 years total payment $71,171. And then a forgiveness amount of
$20,000 and more than likely that $20,000 may be taxed. Alright so the
next thing is the Forgivenesses and the Discharges. So the first one is the
Teacher Loan Forgiveness. So with the Teacher Loan Forgiveness you
do have to teach five complete and consecutive years at a low income school
and so in order to figure out if you work or if you’re going to work at the
low income school you can go to the website TCLI and they will have all
the listed schools. Alright as far as these schools for the Bureau of Indian
Education those schools do qualify. They do count as low income schools. They
will qualify. Another is the forgiveness amount. So if you were looking for a
forgiveness amount of $17,500 you do have to be a highly qualified teacher in
science, math, or special education. As far as a forgiveness amount of $5,000 you
just have to be a highly qualified teacher in education or secondary
education. Those are direct loans and FFELP loans are qualified. And your PLUS loans-
they are not eligible. And if you were teaching at multiple schools, if you
taught at five different schools for five years that will be acceptable. You just
need five different applications from those different schools. (Audience question) “So it says science, math, or special education. Science- does that only include natural sciences or also behavioral sciences?” Anything that’s considered science. What
will happen is you- there’s an application. Application, take it to your school, your
principal or your administrator fills it out and if it’s like, if it says science,
then you put science. If it is chemistry, if it’s anything related to science, physics,
science. Anything related to science- it qualifies. (Unintelligible audience question) So what’ll happen is during your grace
period, during your grace period maybe like the fifth month you actually
receive a notification from your student loan servicer and they will let you know
that, hey, you’re on the standard plan, this is how much, this is the payment. If
you’re not comfortable with that payment, with their plan, contact them. Let them
know, “Hey, I can’t afford this amount,” and what they’ll do is they’ll work with you. They’ll put you on or you- I apologize- they will not put you on but you can say, “Hey I
want to look into the income-driven repayment plan,” they’ll tell you those
numbers. “I want to look into a graduated payment plan,” and they’ll let you know those numbers. So
definitely if you’re not comfortable with it contact your servicer. They’ll
let you know. Alright as far as the the next one is the Public Service Loan
Forgiveness. With the Public Service Loan Forgiveness you do have to make 129 consecutive payments. Also you do have to be employed with a qualified
employer and usually it is a public servicer. Or they can be, I do
believe it’s a 501(c)(3) tax-exempt corporation. Also the qualifying- the qualifying repayment plans for this Public Service Loan Forgiveness or your
income-driven repayment plans is also a ten year standard plan. After you make those
129 qualifying payments the loan will be forgiven and that amount is
not considered tax. Direct Loans, your Grad PLUS loans qualify and in order
for your Parent PLUS loan to qualify the parent has to be the one eligible for
the Public Service Loan Forgiveness. More about the Public Service Loan
Forgiveness so if you were a teacher and you did these five years, those five
years that you use towards the Teacher Loan Forgiveness cannot be used towards
the Public Service Loan Forgiveness. So it would be Teaching Loan Forgiveness- five
years. Public service – 120 payments. You cannot put those five years with
those- with the public service. The private
loans are not eligible and again if you do consolidate, if you were making
payments towards the public service and you decide to consolidate, any payments
made prior to your consolidation will not count because when you consolidate it becomes a new loan. It starts over, starts from scratch.
Here are some discharges- the first one is Closed School. (Audience question) “To the last comment you just said- if you consolidate first, and then do the repayment will it still count towards that?” Yeah, yeah so That’s why I always tell people if you if you
were if you were looking in the Public Service Loan Forgiveness and then you’re
thinking about consolidating go ahead look into consolidation. If you comfortable
with it, consolidate. Then look into one of the
income-driven repayment plans because those are the only plans that you can be
on when you do consolidate. Right right. Okay so again the discharges. Closed
school basically is when school closes and you’re not able to complete your
program, you may be eligible for a discharge of your student loans.
Next is the Total and Permanent Disability where if you are not able to
work again your loans may be discharged. Death-if you pass away
your family members what they would do is they will send your death certificate
to your loan servicer and if is acceptable your loans will be
discharged. And then there’s Borrower Defense to Repayment where if a school
lied to you or misled you in any way stating that, “Hey I can guarantee you a
job after you graduate” or anything- what you would do is you fill the application out,
send it to the Department of Education, the Department of Education will look
further into it. If they say, “Hey we see the same thing you see,” loans may be
discharged. Alright, a couple of suspension of your payments.
the first one is deferment. Deferment is an entitlement given to you by the
Department of Education and no interest will accrue on your subsidized loans
while you are on a deferment. A couple of the most common deferments
that are available or that you may have heard of is economic hardship. You
do have to be in a period of financial difficulty in order to qualify for a
economic hardship. However there is only three years for the life of the loan for
the economic hardship deferment that’s available to you. The next one is the in-school, in-school deferment. So you do have to be enrolled in school at
least half time in order for your for your loans to be placed in an
in-school deferment. Next is the unemployment deferment. Unemployment basically is if you were unemployed or working less than 30 hours
your loans can be placed in an unemployment deferment. With the
unemployment deferment again you only have three years for the life of the loan
and they are used by six-month increments. The next is the Graduate-
graduate fellowship where basically if you are in a graduate program, fill the
application out, send it to your servicer. you can have that deferment placed on your
account. Next is the post-enrollment. And so the
post-enrollment deferment is only for Parent PLUS and Graduate PLUS loans. It’s
basically those six months after you- that’s those six months you get when
you graduate or withdraw or drop down less than half time on your PLUS or
your Parent PLUS or your graduate PLUS loans.
Next is the military deferment. And so with the military deferment you do have
to be in active duty in order to have that deferment placed on your account.
Alright the next one is forbearance. The forbearance- the forbearance- on a
forbearance the interest will accrue. So you are solely responsible for all of
the interest that accrues on a forbearance. And so just a couple of the
more more common forbearances is a general forbearance.
With the general forbearance you only have 36 months for the life of your loan
but a lot of times the servicer will let you use it in different increments. Some
may let you use it for 12 but a lot of them that I’ve noticed they let you use it
for like 3 months, 2- 3 months at a time. And that is really to help you out
because on the forbearance all of the interest will accrue and you will be
responsible for it. It will be added to your balance. Once that forbearance has
ended that interest will be added to your balance.
Next is the internship residency where you do have to be in a medical or dental
residency. You just fill the application out, send it to your servicer, have that
forbearance placed. Next is the teacher loan forgiveness forbearance. And so with
the teacher loan forgiveness forbearance if the expected forgiveness amount will
satisfy the anticipated outstanding balance at the end of the fifth year of
qualifying service you may qualify for that teacher loan forgiveness
forbearance. So basically what that is saying is that if you have a balance of
$10,000 and after five years including interest if it’s under the forgiveness
amount on the teacher loan forgiveness if it’s under $17,500 your loan would be
placed on that teacher loan forgiveness forbearance. Now if you have a $10,000 balance and you only apply for the $5,000
teacher loan forgiveness then you would not get that teacher loan forgiveness
forbearance. Right, next to the loan debt burden forbearance where basically if
your student loan monthly payment is greater than twenty percent you do have
a option to place that option- I mean if to place that loan with that
forbearance on your account. And the last one is the emergency disaster where
basically if there is a emergency or natural disaster in your area you can
have a forbearance placed. You can go to the website FEMA and
you can see if there is a natural disaster or anything happening in your area.
If so contact your servicer and say, “Hey you know there’s a disaster or you know
there’s a state of emergency in my area, I’d like to have a forbearance placed on
my account.” They’ll look it up. They’ll say, “Okay, yeah
I see it. 90 days on the account.” But a lot of times your servicer may
automatically place that option on the account. So and when when they do place
that automatically they will let you know. They will send you a notice or if you
don’t want it on your account just tell them, “Hey I don’t want a forbearance on
my account” and they’ll remove it for you. Not a problem. Next one is
delinquency. So with delinquency, deliquency first day after your
due date so. If your due date’s on the 15th, the 16th. That’s one day delinquency.
After 90 days of delinquency, at the end of the month you will be reported
negatively to the credit bureaus and every 30 days after that until the
account is brought current. You can bring the account current with a
deferment or a forbearance. Default- so when your loan reaches 270 days of
delinquency it is labeled default. Your loan is labeled default. But you still
have 90 days. You still have 90 days to actually do something in regards to you
know getting your loan out of default. Once the loan hits 360 days that’s when your
loan will actually be transferred to the Department of Education. From the
Department of Education it will go to a collection agency. Once it hits the
collection agency they will try to work with you. If you’re still not making
payments with the agency that’s when your wages get garnished. That’s when your
taxes get taken. And that’s when your bank accounts. All the negative stuff that you hear, that’s when that starts to happen. But you do have an option. You do have an
option after deferment, I mean, after default- I apologize. You do have an
option after default. So you can rehabilitate
your loan. So basically what will happen is if you are in collections you do have to-
you have to make nine consecutive payments.
Once you make nine consecutive payments the collection agency will send you a
letter saying, “Well hey, you made these payments.
Do you want to have your loans rehabbed?” Say yes, say no. I would say yes.
Once you -once those loans are rehabbed that default status will be removed and you
will be eligible to take out additional student loan debt. Now the only thing is
you can rehabilitate a defaulted loan only once. Now that’s not saying you can only
rehabilitate one time. That’s only saying one loan, one rehabilitation. So just a
couple couple tips- get organized. Use the NSLDS. Use
everything, use everything that you have. Compare the different repayment plans. Call your
servicer. Look into those plans because they were the one to actually
give you the numbers, the actual numbers. Budget. Get a get a budget for yourself.
If you say that you can afford $200 subtract $50 from that because life
happens. Things happen, you know. So you don’t want to spend all your money. (Audience question) “If you signed up for a specific repayment plan but for some reason you had money over, like you signed up for a job and you got a bonus or something, can you try and pay off more or do you have to stick to the repayment plan?” No, no not at all. So if your monthly payment was $200 and you
say, “Hey, I can afford $500.” You’re more than welcome to send in $500, $1,000, whatever you
want to spend- send in as long as it’s that $200. And also when you do send
in more if you have multiple loans you can decipher how much you want to go to
the different loans. So if you want to just pay one loan off faster than others
no problem doing it. But yeah as long as you satisfy that monthly bill you’re
fine with sending in more. And again, budget. Make a budget for yourself.
Know the eligibility for the forgivenesses and the discharges. Again, things change.
So what I told you now may change next month or next year. So contact your
servicer and ask them about the eligibility.
(Audience question) “With the current Department of Education looking at changing this, if we chose one of these repayment plans would that be our payment plan even if there’s the changes?… Or would it be like this change comes in- now we have to choose that plan.”
So a lot of times what happens is when you do pick a repayment plan you’re
grandfathered in. A lot of times, hey, you chose this plan so as long as you stick
to that plan at that time you’re-you’ll get the same you know rules and
regulations of the plan at that time. But once you change to a different one,
that’s when you go through the new rules and regulations of that plan. Next
is make payments. Make payments doing a deferment or forbearance. It just saves
that that interest, you know, because once that deferment or forbearance ends
that interest will be added to your balance and it will it will make your
balance higher. Make payments on time. If you were in the public service loan
forgiveness you definitely want to make those payments on time. Set up automatic
payments. When you do set up automatic payments you will receive a .25 interest rate reduction and that will pay your loans off faster. Even
though a lot of people say, “Hey, that’s so small.”
It helps. Every little bit helps. Also you can receive a tax deduction from the
interest paid. You can receive a 1098E form. If you pay $600 or more they will
automatically send their form to you. Anything below that amount just
call them, just call them and request it and they will send that information to
you. Again, $600 or more-it will be sent to you. Anything below that call them and they
can get that to you. You are able to change your plan and your due date but
again contact your servicer because different rules and regulations
for different servicers. They’ll let you know how to go about changing your plan.
If you have any difficulties, questions, or concerns contact your servicer. I mean,
like i said, I can’t stress that enough. Contact your servicer. They will be the
ones to help you. Any any questions contact your servicer. And if you have
any questions in regard to your servicer, any problems, you can go to the
Ombudsman group. They are like a mediator between you and your servicer.
So here’s all the, again, the links-, you go to nslds and
then the the lender websites. Alright so that concludes my presentation. Any
questions or comments at this time? (Audience question) “For the Grad PLUS loans does the 6 month deferment automatically take place or do you have to call your service provider?”
You do, you do have to contact your servicer. There’s an
application. There’s an application you have to fill out and you will see it on
application say “post-enrollment,” check “post-enrollment,” send it back to you,
they’ll place those six months on your account. (Audience question) “So on one side it said that if you consolidate your loans you’ll pay more but what about the individual payments? Wouldn’t I have to pay more in individual payments if I have five different loans then if I only have one payment…like, would I have like 5 payments of $100 dollars or would I
have or would like with the five loans together
the payments like the sum of it, would it be more or less than if I
consolidate those five loans?”
So if you if you do not consolidate what will happen is your
loans will be paid off within 10 years. Those are those are the plans unless you
go on an income-driven repayment plan. If you do not consolidate loans will be paid
off within 10 years. When you consolidate the loan will be paid off in 25 years so
stretch it out, more interest. That’s why you’ll pay more. (Continued question) “But the individual payments would be- so the payments month to month would be smaller if you consolidate?”
Right, right. But you can always, like you say, you can always
pay more to pay it to pay it off. More than welcome to pay more.

Paul Whisler

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