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CONTROLLING YOUR

STUDENT LOAN$ NOW


Naveen Jindal School of Management
Spring 2016 Comet Cents Workshop

In fiscal year 2014, students


borrowed approximately $________
through federal loan programs.
$500M

$10B

$1B

$100B

$100,000,000,000
BY LAW, THE U.S. DEPARTMENT OF
EDUCATION
CONSIDERS
A
BORROWER TO BE IN DEFAULT WHEN
HE
FAILS
TO
MAKE
ON-TIME
REPAYMENT OF HIS LOANS FOR NINE
CONSECUTIVE MONTHS. IN 2014 Q3,
$98.1B IN STUDENT LOANS WERE IN
DEFAULT.

Types of Student Loans

Stafford Loans

Most Common

Perkins Loans

PLUS Loans

Private Loans

Subsidized
vs.
Unsubsidized

No payments
until after
graduation
No interest on
loans while in
school
Reserved for
students with
financial hardship
Limitations on
amount

Also no payments until after


graduation!

Interest rates apply when you get the


loans..

Higher limits for graduate students


and medical students

Perkins Loans

More desirable than Stafford Loans, but


tighter eligibility rules
All Perkins Loans are subsidized, and have
fixed interest rates
These loans are reserved for students with a
significant financial need
Government gives money to the college or
university, and they distribute it to the
students
Lower borrowing limits than Stafford Loans

PLUS Loans

Available to parents and graduate


students

Parents apply for their dependent students

Also federally funded, but with no


maximum limit

Higher interest rates

Private Loans

Useful when government financial aid


does not meet the needs of a student
Eligibility depends on your credit history
Higher interest rates than federal loans,
but lower than credit cards
May also require payments while you are
still in school!
Generally unsubsidized, interest may not
be tax deductible

Repayment Plans
Standard Plan
Fixed | 10 years

Graduated Plan

Lower-Higher | 10 years

Extended Plan

Fixed or Graduated | 25 years

Income-Based Plan

Income Contingent Plan

Pay As You Earn


10%
Plandiscretionary | 20

Income Sensitive Plan

15% discretionary | 25
years

years

Calculated Annually | 25 years

Annual income | 10 years

Meet Michael

Borrower Michael
Employment status Human Resource
Manager
Income $89,000
Loan debt $62,000 federal
Which repayment option should Michael consider?

Total cost of Michaels $62,000


Standard repayment

$85,619

Graduated repayment

$90,244

Extended repayment

$129,097

Extended graduated
repayment

$139,031

Pay As You Earn

$89,007

Staying on Track
Setting
Lender(s) Limits Budgeting

Manage

Salary

Lifestyle
Banking

Organize

Tracking

NSLDS

Select

Pay

Adjust
12-24
Months

Celebrate!
More than
the
minimum

Repayment Process
Apply

Graduation | Exit Counseling


Online Resources | Comet Cents

Wait

Deferment | Select Plan


6 months before you pay!

Work

Employment
Repayment source for loans

Repa
y

Repayment Plan
Student responsible for repaying

Repayment Lifecycle

Default Late Making Paid


Payments Payments Off
Consequences Risky
Behavior
Plan

Working the

Celebrate!

Before you default on your student


loans, you should

Leave the country

Contact lender(s)

Change your
name

Fake your death

Contact Your Lender(s)


YOU LOSE OPTIONS IF YOU DEFAULT ON
YOUR LOANS. DEFAULTED BORROWERS
ARE INELIGIBLE FOR DEFERMENTS AND
FORBEARANCES. THERE ARE MANY
OPTIONS THAT MAY HELP PREVENT YOU
FROM
GETTING
INTO
DEFAULT.
IGNORING THE PROBLEM WILL NOT
MAKE IT GO AWAY; IT JUST DIGS YOU
INTO A DEEPER FINANCIAL HOLE AS
INTEREST CONTINUES TO ACCRUE.

Consequences of Defaulting
Garnishment of up to 15% of wages and Social
Security benefits
Income tax refunds may be intercepted (offset)
Collection charges of up to 25% deducted from
each payment, slowing repayment trajectory
Restriction on renewing professional licenses
The default will prevent you from getting credit
cards, auto loans and mortgages and may make it
harder to rent an apartment or get a job
You will be ineligible for more federal student aid

Loan rehabilitation.

Loan Rehabilitation
Rehabilitation is a one-time opportunity to remove a
federal student loan default from your credit history
and to regain student aid eligibility.
Regain eligibility for federal student aid after making
6 consecutive full and voluntary on-time payments
After making 9 of 10 consecutive on-time payments,
you can apply to have the loan rehabilitated and the
default can be removed from your credit history
Call the US Department of Education's Default
Resolution Group at 1-800-621-3115 or TTY 1-877825-9923 for more information.

On-Campus Resource: Comet Cents

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Federal Student Aid Website


https://studentaid.ed.gov/sa/