Loan Presentation
Transcript: WHEn HOW Understanding YOur LOans Congresswoman Jayapal's Office WHY What is a loan? Federal Direct loan program (unsubsidized/subsidized stafford) Federal Perkins Loan GRant Vs. Loan GRant Vs. Loan Grants Loans Must pay back Free money! Subsidized: loans you don't pay interest until after 6 months of graduating Unsubsidized: must pay interest; responsible for interest even while in school Federal Family Education Loan (FFEL): were loans offered by private lenders but is now under the umbrella of Direct Loan program provided by the Dept of Ed. Parent PLUS Loan: Parents of dependent child can take this loan out. Direct Loan Program Direct Loan Program Federal student loan, made by the recipient's school, for undergraduate and graduate students who demonstrate financial need. Federal Perkins Loans Federal Perkins Loans Loan Companies who are in charge of collecting your loan payments Loan Servicers CornerStone FedLoan Servicing (PHEAA) Granite State-GSMR Great Lakes Educational Loan Services, Inc HESC/Edfinancial MOHELA Navient Nelnet OSLA Servicing List of Loan Servicers List of Loan Servicers If you don't know who your Loan Servicer is visit: https://studentaid.ed.gov/sa/?log-in Interest Rates Interest RAtes Rates vary depending on the date of your first disbursement Once you've taken out a loan, rates are fixed for the lifetime of the loan RAtes for Direct Loan Program RAtes for Direct Loan Program *Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%. Loan FEes Loan FEes This is deducted proportionately from each loan disbursement you receive; money you receive will be less than the amount you actually borrow. You're responsible for repaying the entire amount you borrowed and not just the amount you received. IDEAS Steps to take While in COllege Step 1: Borrow only what you need Your school might approve more loan funds than you actually need, so only borrow what is necessary. If you take out more than what you need, return the extra money. If you return the money within 120 days of disbursement, It will process as a Borrower Cancellation Payment. Keep in mind that you must complete an Entrance Counseling before receiving your loan. Step 1: Borrow only what you need STep 2: Create an account with your loan servicer Loan servicer handles billing Its important to get familar with their payment process STep 2: Create an account with your loan servicer Step 3: Exit Counseling Must complete Provides information you need to help you prepare for repayment Check with your school to find out how they want you to complete exit counseling; requirements vary. Step 3: Exit Counseling Steps to take After College Step 1: Know when to start Payments Loans have an approximately 6 month grace period after graduation. PLUS loans don't have grace periods. Once the loans are fully disbursed, payments must start. For Perkins loans grace periods vary; check with your school Step 1: Know when to start Payments step 2: CHoose a repayment plan Different repayment plans are available if you feel you may not be able to afford your monthly payment. Use a repayment estimator to determine which plan best suits you step 2: CHoose a repayment plan STep 3: COnsider loan consolidation This allows you to combine multiple federal loans into one loan Only one single monthly payment instead of multiple Can also give you access to additional loan repayment plans and forgiveness programs STep 3: COnsider loan consolidation REpayment Plans REpayment Plans Pay As You Earn (PAYE) Right for you if you have a sizeable amount of student loan debt, are unsure if you can afford your monthly payments, or have little to no income Payment amounts based on your income and family size; usually 10% Payments made for up to 20 years; can ask for loan forgiveness after Pay As You Earn (PAYE) Income Based Repayment Right for you if you have little to no income, mounds of student loan debt, or you're stressed about the affordability of your monthly payments Monthly payments as low as $0 per month Payments are generally 15% of your discretionary income (10% for new borrowers*) Payments are made for up to 25 years Income Based Repayment Income-Contingent Repayment Right for you if you are worried about your monthly payments and need some flexibility based on your financial situation. Payment amounts based on your income, family size, and loan debt Payments are generally adjusted based on your income using the lesser of: 20% of your discretionary income The amount you would pay under a fixed repayment plan over 12 years. Payments are made for up to 25 years Income-Contingent Repayment GRaduate Repayment Plans Right for you if you may be able to afford higher payments in the future, but a smaller monthly payment would be helpful now Quickest payoff Maximum repayment term of 10 years for unconsolidated loans, and up to 30 years for consolidated loans Lower monthly payments that increase over time; increase every 2 years throughout the