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![Page 1: An Exit Program a Repayment Plan Create Manageable Office of Student Financial Aid Information based on federal regulations in effect through June 30,](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649e715503460f94b6f6c1/html5/thumbnails/1.jpg)
An Exit Program
a
Repayment Plan
CreateManageable
Office of Student Financial AidInformation based on federal regulations in effect through June 30, 2006
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Steps To Manageable Repayment
• Gather information and prepare for repayment• Understand repayment plans• Learn options for postponing repayment• Identify opportunities to manage your debt
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School’s Average Profile
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Student Debt Profile
Note: 3.50% interest rate assumed Values shown are estimates and intended for use as a guideline
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Repayment Ability
8.00% 16.00% 24.00% 32.00% 40.00% 48.00% 56.00% 64.00% 72.00% 80.00% 88.00%
6.00% 12.00% 18.00% 24.00% 30.00% 36.00% 42.00% 48.00% 54.00% 60.00% 66.00%
4.80% 9.60% 14.40% 19.20% 24.00% 28.80% 33.60% 38.40% 43.20% 48.00% 52.80%
2.40% 4.80% 7.20% 9.60% 12.00% 14.40% 16.80% 19.20% 21.60% 24.00% 26.40%
1.92% 3.84% 5.76% 7.68% 9.60% 11.52% 13.44% 15.36% 17.28% 19.20% 21.12%
1.60% 3.20% 4.80% 6.40% 8.00% 9.60% 11.20% 12.80% 14.40% 16.00% 17.60%
1.37% 2.74% 4.11% 5.49% 6.86% 8.23% 9.60% 10.97% 12.34% 13.71% 15.09%
1.20% 2.40% 3.60% 4.80% 6.00% 7.20% 8.40% 9.60% 10.80% 12.00% 13.20%
1.07% 2.13% 3.20% 4.27% 5.33% 6.40% 7.47% 8.53% 9.60% 10.67% 11.73%
.96% 1.92% 2.88% 3.84% 4.80% 5.76% 6.72% 7.68% 8.64% 9.60% 10.56%
$200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200
$30,000
$40,000
$50,000
$100,000
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
Manageable(8% or less)
Challenging(between 8% and 18%)
Complex(18% or greater)
Est
ima
ted
Sa
lary
Educational Payment as a Percent of Gross
Monthly Income
Monthly Student Loan Payment
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Gather information and prepare for repayment
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Master Promissory Note (MPN) and Promissory Note
• States your promise to repay the loan
• Defines loan terms and your rights and responsibilities
Signed an MPN for Stafford Loan funds
Signed promissory note for other loans
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It’s an Obligation
• Do not complete your academic program• Are not satisfied with your education from
the school• Do not find employment after leaving school• Do not receive a payment notice from your lender
You must repay your student loans even if you:
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Rights & Responsibilities
For Stafford Loans, you have a right to:• Request a written statement of your loan• Prepay your loan without penalty• Request a deferment or forbearance
You also have a responsibility to:• Participate in an entrance and exit session
• Notify your lender/servicer of changes to your name, address and enrollment status
• Repay the loan and notify the lender/servicer when your ability to repay changes
Review your Exit Handbook for a complete list.
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Sorting Through the Information
• Identify your lender(s) and servicer(s)
• A lender or servicer will:– Send interest statements
– Calculate and monitor grace period
– Set your first payment due date
– Process payments
– Write or call if you are late with a payment
• Request an account statement fromeach lender
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Keep a File of Information
• Account statements• Lender and servicer contact
information• Promissory notes• Financial aid office correspondence• Lender and servicer correspondence
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Phases of Your Federal Loans
Private loan borrowers should contact their lender for details.
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They Differ from Federal Loans
• Is there a grace period, and what is the length?• When does repayment begin, and how long does it last?• Can I postpone repayment?• What are my deferment and forbearance options and
requirements?• How and when is interest calculated?• What are your interest capitalization policies?• Is there a repayment incentive?
Private or Institutional Loans: Ask Questions
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Understand repayment plans
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Thinking Beyond Today
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Repayment Plans
Repayment Term
Mo
nth
ly P
aym
en
t A
mo
un
t
Standard
Graduated
Income-Sensitive
Higher monthly payment; lower interest costHelpful option if you initially require smaller paymentsHelpful option if you initially require smaller payments; adjusted regularly
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Remember Prepayment
• Make extra payments or pay entire balance at any time without penalty
• It’s an option for every repayment plan• Pay less in interest expense because your principal
balance is decreasing faster
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Interest Capitalization
• Lender adds accrued interest to the outstanding principal balance of the loan
• Accruing interest on interest• Frequency of capitalization
varies by lender– Less frequent capitalization
is better
T.H.E. has a borrower-friendly
interest capitalization policy
T.H.E. has a borrower-friendly
interest capitalization policy
Private loan borrowers should contact their lender for details.
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Repayment Strategies Calculator
www.theloanprogram.org/tlc/Calculators/RepayStrategyCalc.aspx
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Learn options for postponing repayment
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Reduce total repayment: pay accrued interest during grace and deferment.
Deferment Basics
• Postponement of repayment for a specific time period
• Apply and meet criteria• Borrower responsible for interest on unsubsidized
loans– Accrues or can be paid
• Interest rate lower than in repayment (Stafford only)
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Common Deferments
In-School Deferment
Economic Hardship Deferment
Graduate Fellowship Deferment
Unemployment Deferment
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Forbearance Basics
• Use only if you are not eligible for deferment or have exhausted deferment benefits
• Temporary postponement or reduction of payment• Apply and meet criteria
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In-School Deferment
• Enrolled at least half-time at an eligible school
• No limit, as long as you continue to be enrolled
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Economic Hardship Deferment
• Qualification based on a ratio of income to monthly student loan payments
• Ideal for early years of medical residency• Must apply and qualify each year• Available for up to 3 years
Find out if you may qualify by using our online calculator: www.theloanprogram.org/tlc/Calculators/HardshipCalc.aspx
Find out if you may qualify by using our online calculator: www.theloanprogram.org/tlc/Calculators/HardshipCalc.aspx
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Unemployment Deferment
• Apply with documentation of employment status• Granted in six-month intervals• Up to 24 or 36 months of deferment
– Depending on date received Federal Stafford Loans
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Forbearance Basics
• Use only if you are not eligible for deferment or have exhausted deferment benefits
• Temporary postponement or reduction of payment
• Apply and meet criteria
• Interest accrues on both subsidized and unsubsidized loans
• Interest rate equals current repayment rate
• Interest capitalization occurs at the end of each forbearance period with some lenders
T.H.E. has a borrower-friendly
interest capitalization policy
T.H.E. has a borrower-friendly
interest capitalization policy
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Repayment Timeline
Federal Stafford LoansSubsidized & Unsubsidized
Federal Perkins Loanson or after July 1, 1993
6-month Grace Period
9-month Grace Period
Economic HardshipApply each year, up to three years
Economic HardshipApply each year, up to three years
Repayment or Forbearance
Repayment or Forbearance
Private & Institutional Loans
Contact your lender (private) or school (institutional) for details
App
ly
App
ly
App
ly
Gra
duat
ion
App
ly
App
ly
App
ly
Gra
duat
ion
6-mo. Post-
Deferment Grace Period
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Loan Discharge
• Release of a borrower’s obligation to repay his or her federal loan, either in whole or in part– Death
– Disability
• Application process differs according to discharge situation
Private/Alternative Loan discharge terms vary by lender.
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Identify opportunities to manage your debt
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Budgeting for Success
• Prevent financial trouble• Learn how to be a smart consumer• Prepare a secure future by setting
and achieving goals
Wise borrowing and smart financial habits can help lower your debt.
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Smart Financial Habits
• Get organized• Determine your income• Identify your expenses• Balance your budget
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Get Organized
• Collect information– Bills
– Account statements
– Receipts
• Know your income• Track expenses with a
spending journal
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Determine Your Income
Total the Sources:
• Employment• Personal Savings• Family Contribution
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Identify Your Expenses
Fixed Expenses
• Rent/Mortgage/Association Dues• Car payments• Insurance premiums• Child care • Taxes• Student loan payments
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Identify Your Expenses
Variable Expenses• Utilities
• Food
• Clothing
• Medical/Dental
• Household
• Transportation
• Credit card
Using credit cards is not a good option for covering expenses you cannot handle.
You have the power to control your expenses.
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Is Your Budget Balanced?
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Expenses Exceeding Funds?
Eliminate or modify budget items that you control:• Necessity vs. need• Share — split the cost• Get a roommate• Planned buying• Loan consolidation• Refinance your mortgage• Consider automobile options
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Managing Credit
• Understand what is included in your credit report
• Maintain a high FICO® score
• Pay all bills on time
• Open new accounts over time, not all at once
• Pay off debt, rather than moving it around to other credit cards
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Federal Consolidation Loan
• Simplify multiple student loans with one point of contact
• Reduce your monthly payment amount
• Lock in a fixed interest rate for up to 30 years
A Federal Consolidation
Loan can make things easier!
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Federal Loan
Consolidation
Will Be
Changing
Information based on federal regulations in effect through June 30, 2006
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• Must be in grace period or have entered repayment on loans selected for consolidation– Includes loans in deferment or forbearance
– In-school loans are eligible after student requests early repay
• Eligible loans include:– Federal Stafford
– Perkins
– Others in handbook
Consolidation Requirements
Private loans are not eligible for Federal Consolidation.
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Repayment Term
• Extending the term lowers monthly payments
• Length is limited based on your total outstanding student loan debt
Amount Owed Loan Term (Years)
Less than $7,500 10
$7,500 - $9,999 12
$10,000 - $19,999 15
$20,000 - $39,999 20
$40,000 - $59,999 25
$60,000 or more 30
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Interest Rate
• Interest rate is the weighted average of consolidated loans’ rates – rounded up to the nearest 1/8%
• Grace period and deferment ideal times to apply• Direction of rates around July 1 can
influence timing
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Eligible Deferments
Economic Hardship
Pursuing a Graduate Fellowship
Enrolled at Least Half Time
Unemployment
Gain peace of mind and simplify your student loan debt today.
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Selecting the Right Lender
The only differences between consolidation lenders are service and incentives
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Selecting the Right Lender
• Knowledge and experience• Accessibility• Credibility• Long-term commitment
Service
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Compare Incentives
T.H.E. Repayment Bonus:• Monthly credit• Starts immediately upon
repayment• Will not lose benefit• Deferments/forbearances do
not harm availability• More than 95% of our
borrowers in repayment receive the bonus
Ask the Lender:• What is the incentive?• Is there a waiting period?• What happens if I miss a
payment? • What happens if I request a
deferment?• How many of your borrowers
receive it?
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Compare Incentives
From U.S. News & World Report
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I consolidated some of my loans while I was enrolled in school this past year.
Now what?
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Need to Know
• No grace period on existing consolidation loan• Options
– Deferment
– Forbearance
– Minimum Payment
• Be proactive, contact your lender regarding repayment
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Consolidation Options
Second Consolidation Loan• Consolidate outstanding eligible loans separate
from previous consolidation loan
Re-Consolidate• Combining previous consolidation loan with other
outstanding eligible loans
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How to DecideKeeping them separate vs. re-consolidation
Separate:
• If you made the right choice on who holds your first consolidation loan, then it makes sense to create a second consolidation loan with that same lender
Why? —
• Maximize your savings– Pay down the higher rate loan faster as finances allow
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How to DecideKeeping them separate vs. re-consolidation
Re-consolidation:• If you find that another lender has a better reputation of service and
a deliverable incentive, then bring all your loans together with that new lender (previous consolidated debt with recent consolidated debt)
Why? —• Simplification and savings
– Loans at one place, one point of contact and one payment– Minimize your monthly payment by maxing out your
repayment term
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Second Consolidation Loan
Application Process• Submit your Consolidation Application
– List loans to be consolidated (e.g. recent Stafford) on page 2
– List previous consolidated debt on page 3
– To retain grace period, complete question #26
• Separate interest rate• Typically one consolidation account with one payment
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Second Consolidation LoanRemember Your Repayment Strategy
Minimize Interest Expense
• Maximize your repayment term • Pre-pay consolidation loan with
higher interest rate as finances allow
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Re-Consolidation
Application Process
• Submit your Consolidation Application – List loans to be consolidated, including previous consolidated debt
on page 2
– To retain grace period, complete question #26
– Manage repayment on previous Consolidation Loan during Stafford grace: make payments, request deferment or forbearance
• Interest rate re-calculated• New payment schedule issued
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Create Your Repayment Strategy
Consolidation Extend Term Interest Only Deferment/ForbearanceComplexChallengingManageable
8.00% 16.00% 24.00% 32.00% 40.00% 48.00% 56.00% 64.00% 72.00% 80.00% 88.00%
6.00% 12.00% 18.00% 24.00% 30.00% 36.00% 42.00% 48.00% 54.00% 60.00% 66.00%
4.80% 9.60% 14.40% 19.20% 24.00% 28.80% 33.60% 38.40% 43.20% 48.00% 52.80%
2.40% 4.80% 7.20% 9.60% 12.00% 14.40% 16.80% 19.20% 21.60% 24.00% 26.40%
1.92% 3.84% 5.76% 7.68% 9.60% 11.52% 13.44% 15.36% 17.28% 19.20% 21.12%
1.60% 3.20% 4.80% 6.40% 8.00% 9.60% 11.20% 12.80% 14.40% 16.00% 17.60%
1.37% 2.74% 4.11% 5.49% 6.86% 8.23% 9.60% 10.97% 12.34% 13.71% 15.09%
1.20% 2.40% 3.60% 4.80% 6.00% 7.20% 8.40% 9.60% 10.80% 12.00% 13.20%
1.07% 2.13% 3.20% 4.27% 5.33% 6.40% 7.47% 8.53% 9.60% 10.67% 11.73%
.96% 1.92% 2.88% 3.84% 4.80% 5.76% 6.72% 7.68% 8.64% 9.60% 10.56%
$200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200
$30,000
$40,000
$50,000
$100,000
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
Est
ima
ted
Sa
lary
Monthly Student Loan Payment
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Remember:
Consequences of Delinquency/Default
Delinquent: late monthly payment– Collection activity
– Damage to credit rating
Default: failure to pay for 270 days– Collection and legal activity
– Damage to credit rating for seven years or more
– Wages could be garnished
– Professional license could be suspended or revoked
Update your address and phone number with lenders/servicers.
Don’t ignore mail.
Delinquency/Default terms may differ for private and other federal loans.
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An Exit Program
Questions & Discussion
Contact Us:
888-843-0004www.northstar.orgOffice of Student Financial Aid