Repayment Loan Options

Repayment Loan Options

Agenda

• Income-Driven Repayment Plans Overview– Pay As You Earn Plan– Income-Based Repayment Plan– Income-Contingent Repayment Plan– Income Sensitive Repayment Plan

• Other Repayment Plans– Standard– Graduated– Extended (fixed or graduated)

• Resources

Income-Driven Plans Overview

Pay As You Earn IBR ICR

Payment Calculation

10% of discretionary income Discretionary income = The difference between the borrower’s AGI and 150% of the poverty guideline for their family size and state.

15% of discretionary income Discretionary income = The difference between the borrower’s AGI and 150% of the poverty guideline for their family size and state.

20% of discretionary incomeDiscretionary income = The difference between the borrower’s AGI and 100% of the poverty guideline for their family size and state.

Who Qualifies• New Borrowers as of 10/1/07; and, • Obtains a new Direct Loan disbursement on/after

10/1/11. • Partial Financial Hardship (PFH)

• Partial Financial Hardship (PFH) • Direct Loan borrowers

Eligible Loans

• Direct Subsidized and Unsubsidized Loans • Direct PLUS Loans made to graduate or

professional students, and • Direct Consolidation Loans that did not repay a

FFELP or Direct Parent PLUS Loan

• Direct and FFELP Subsidized and Unsubsidized Loans

• Direct and FFELP PLUS Loans made to graduate or professional students, and

• Direct and FFELP Consolidation Loans that did not repay a FFELP or Direct Parent PLUS Loan

• Direct Subsidized and Unsubsidized Loans

• Direct PLUS Loans made to graduate or professional students, and

• Direct Consolidation Loans that repaid a FFELP or Direct Parent PLUS Loan (disbursed on/after 7/1/06 )

Interest Subsidy Benefit

• If the monthly Pay As You Earn payment amount does not cover the interest that accrues on the loans each month, the government will pay the unpaid accrued interest on the borrower’s Direct Subsidized Stafford Loans for up to three consecutive years from the date they began repaying under Pay As You Earn.

• If the monthly IBR payment amount does not cover the interest that accrues on the loans each month, the government will pay the unpaid accrued interest on the borrower’s Subsidized Stafford Loans (either Direct Loan or FFEL Loans) for up to three consecutive years from the date they began repaying under IBR .

• The amount capitalized will not exceed 10% of original amount owed when the borrower entered repayment

Forgiveness 20 Years 25 Years 25 Years

For more details on eligibility, go to www.studentloans.gov

http://www.studentloans.gov/

Poverty Guidelines 2012-13

• The following chart contains information from the Department of Health and Human Services (HHS). To determine your family size, count your children if they receive more than half their support from you, and count other persons if they live with you as well as receive more than half their support from you currently and for the foreseeable future. Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, payment of college costs, and so on.

• Next, find the column that represents your place of residence. Read down to your family size. This is the poverty guideline for you.

• Family size 48 Contiguous statesand D.C. Alaska Hawaii

• 1 11,170 13,970 12,860• 2 15,130 18,920 17,410• 3 19,090 23,870 21,960• 4 23,050 28,820 26,510• 5 27,010 33,770 31,060• 6 30,970 38,720 35,610• 7 34,930 43,670 40,160• 8 38,890 48,620 44,710

• For each additionalperson, add 3,960 4,950 4,550

• Last updated February 22, 2013

http://aspe.hhs.gov/poverty/12poverty.shtml

An Example of Calculating Payments

• 1 Person = $11,170 Poverty Guidelines

• 150% of $11,170 = $16,755

• $60,000 Adjusted Gross Income - $16,755 = $43,245 (discretionary income)

• $43,245 x 10% for Pay As You Earn Program (PAYE) divided by 12 months would be $360.38 payment in PAYE

• $43,245 x15% for Income Based Repayment Program divided by 12 months would be $540.56 payment in IBR

Income-Driven Plan Payment Comparison

Income

Family Size

1 2 3 4 5 6

$15,000

IBR $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

ICR $64.00 $0.00 $0.00 $0.00 $0.00 $0.00

Pay As You Earn $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

$20,000IBR $41.00 $0.00 $0.00 $0.00 $0.00 $0.00

ICR $147.00 $81.00 $15.00 $0.00 $0.00 $0.00

Pay As You Earn $27.00 $0.00 $0.00 $0.00 $0.00 $0.00

$25,000IBR $103.00 $29.00 $0.00 $0.00 $0.00 $0.00

ICR $184.00 $165.00 $99.00 $33.00 $0.00 $0.00

Pay As You Earn $69.00 $19.00 $0.00 $0.00 $0.00 $0.00

$30,000IBR $166.00 $91.00 $17.00 $0.00 $0.00 $0.00

ICR $204.00 $193.00 $182.00 $116.00 $50.00 $0.00

Pay As You Earn $110.00 $61.00 $11.00 $0.00 $0.00 $0.00

$35,000IBR $228.00 $154.00 $80.00 $10.00 $0.00 $0.00

ICR $221.00 $212.00 $212.00 $199.00 $133.00 $67.00

Pay As You Earn $152.00 $103.00 $53.00 $0.00 $0.00 $0.00

$40,000IBR $291.00 $216.00 $142.00 $68.00 $0.00 $0.00

ICR $235.00 $232.00 $232.00 $232.00 $217.00 $151.00

Pay As You Earn $194.00 $144.00 $95.00 $45.00 $0.00 $0.00

$45,000IBR No-PFH $279.00 $205.00 $130.00 $56.00 $0.00

ICR $249.00 $248.00 $248.00 $248.00 $248.00 $234.00

Pay As You Earn $235.00 $186.00 $136.00 $87.00 $37.00 $0.00

$50,000IBR No-PFH No-PFH $267.00 $193.00 $119.00 $44.00

ICR $264.00 $264.00 $264.00 $264.00 $264.00 $264.00

Pay As You Earn $277.00 $228.00 $178.00 $129.00 $79.00 $30.00

This chart is based on the charts shown on pages 66117 and 66118 of the Federal Register issued on November 1, 2012 which published the final regulations.

This chart assumes an loan debt of $26,000 and an interest rate of 6.80%.

Pay As You Earn

• Under Pay As You Earn, borrowers pay the lesser of:– 10% of discretionary income or what they would have paid under the 10-year Standard

repayment plan.

– Discretionary income for this plan is the difference between the borrower’s AGI and 150 percent of the poverty guideline amount for his/her state of residence and family size.

• Interest subsidy benefit‾ If the monthly Pay As You Earn payment amount does not cover the interest that

accrues on the loans each month, the government will pay the unpaid accrued interest on the borrower’s Direct Subsidized Stafford Loans for up to three consecutive years from the date they began repaying under Pay As You Earn or IBR.

• The three years does not include periods of Economic Hardship Deferment• Borrower must pay all interest on unsubsidized loans

• For Pay As You Earn, the remaining balance is forgiven after 20 years of qualifying repayment

Income-Based Repayment (IBR)

• Under IBR, borrowers pay the lesser of:– 15% of discretionary income or what they would have paid under the 10-year Standard

repayment plan – Discretionary income for this plan is the difference between the borrower’s Adjusted Gross

Income (AGI) and 150 percent of the poverty guideline amount for his/her state of residence and family size.

• Interest subsidy benefit– If the monthly IBR payment amount does not cover the interest that accrues on the loans

each month, the government will pay the unpaid accrued interest on the borrower’s Subsidized Stafford Loans (either Direct Loan or FFEL Loans) for up to three consecutive years from the date they began repaying under IBR or Pay As You Earn.

• The three years does not include periods of Economic Hardship Deferment

• Borrower must pay all interest on unsubsidized loans

• 25 year loan forgiveness– If the borrower makes 25 years of qualifying payments and meets certain other

requirements, any remaining balance will be cancelled

IBR Payment Amounts

The IBR Partial Financial Hardship (PFH) payment amount is determined by the AGI and family size• If the borrower is married and files a joint federal tax return, the AGI

includes both spouse’s incomes together• If the spouse has eligible student loan debt, this debt may also be taken

into consideration when determining whether the borrower has a PFH• Annual IBR repayment amount is 15% of the difference between the

borrower’s AGI and 150% of the Department of Health and Human Services Poverty Guideline for their family size and state– Divide this amount by 12 to get the monthly IBR payment amount– The IBR payment amount will be adjusted yearly based on income and family

size but will never be more than what would be required to be paid under a 10-year Standard Plan based on the balance of the eligible loans when the borrower began repayment under the IBR plan

Leaving IBR

• If borrowers leave IBR and have unpaid interest, it will capitalize to principal, increasing principle balance

• The borrower is placed into the Standard Plan based on the term remaining for their loan type– For example, Stafford/PLUS Loans will have 10 years minus the time in

repayment. Consolidation Loans may have 10-30 years minus the time in repayment.

– Borrowers may request a reduced payment forbearance if they cannot afford the payment amount on the standard repayment plan.

• Borrowers who leave IBR can come back if they demonstrate "partial financial hardship".

Income-Contingent Repayment (ICR)

• Each year the monthly payments are recalculated based on:– AGI (includes spouse’s income if married)

• The spouse’s income will only be included if they file federal taxes jointly or are repaying under joint ICR

– Family size– Total amount of the borrower’s Direct Loans

• If payments are not large enough to cover the interest that accrues monthly, the unpaid interest is capitalized once each year– The amount capitalized will not exceed 10% of original amount owed when the borrower

entered repayment– If the borrower’s payments are not enough to cover the accruing interest, it will continue to

accrue but will not be capitalized if the borrower has reached the 10% limit

• After 25 years, the remaining balance will be discharged

Income-Driven Repayment Examples

Eligible Loan Debt - $31,000 (6.8% interest rate/unsubsidized)Starting AGI - $25,000(AGI increasing 4% annually, Poverty Level Change Rate 3%)Family Size = 1

Pay As You Earn Repayment Plan

(20 years)

Income Based Repayment Plan

(IBR) (25 years)

Income Contingent

Repayment Plan(ICR)

(25 years)

Standard Repayment Plan

(10 years)

First Monthly Payment $68.71 $103.06 $229.54 $356.75

Maximum Monthly Payment $194.09 $356.75 $256.84 N/A

Total Interest Paid $29,080.78 $41,593.20 $26,348.39 $11,809.83

Total Principal Paid $343.11 $22,723.65 $26,348.39 $31,000.00

Total Amount Paid $29,423.88 $64,316.85 $57,348.39 $42,809.83

Remaining Principal Balance and Unpaid Interest

$30,656.89 $13,145.04 $0.00 $0.00

Total Loan Forgiveness $43,718.25 $13,145.04 $0.00 $0.00

Examples from FinAid.org calculators

Married Filing Jointly Example

For the purposes of this example, the borrower’s AGI = $25,000 and the spouse’s AGI =$30,000. The spouse has no loan debt.


Eligible Loan Debt - $50,000 (6.8% interest rate/unsubsidized)Starting AGI - $55,000(AGI increasing 4% annually, Poverty Level Change Rate 3%)Family Size = 2/Married Filing Jointly


(19.8 years)


(IBR)(12.5 years)

Income Contingent

Repayment Plan(ICR)

(11.8 years)


(10 Years)


Maximum Monthly Payment $575.40 $575.40 $529.77 $575.40

Total Interest Paid $49,470.58 $26,433.15 $23,235.20 $19,048.28

Total Principal Paid $50,187.09 $50,000.00 $50,000.00 $50,000.00

Total Amount Paid $99,470.58 $76,433.15 $73,235.20 $69,048.28

Remaining Principal Balance and Unpaid Interest $0.00 $0.00 $0.00 $0.00

Total Loan Forgiveness $0.00 $0.00 $0.00 $0.00

Married Filing Separately Example

For the purposes of this example, the borrower’s AGI = $25,000 and the spouse’s AGI =$30,000. The spouse has no loan debt.


Eligible Loan Debt - $50,000 (6.8% interest rate/unsubsidized)Starting AGI - $25,000(AGI increasing 4% annually, Poverty Level Change Rate 3%)Family Size = 2/Married Filing Separately


( 20 years)


(IBR)(25 years)

Income Contingent

Repayment Plan(ICR)

(25 years)


(10 Years)


Maximum Monthly Payment $107.30 $224.35 $402.48 $575.40

Total Interest Paid $13,462.88 $32,055.71 $$82,332.03 $19,048.28

Total Principal Paid $0.00 $0.00 $10,446.97 $50,000.00

Total Amount Paid $13,462.88 $32,055.71 $$92,779.00 $69,048.28Remaining Principal Balance and

Unpaid Interest$104,537.12 $102,944.29 $56,109.37 $0.00

Total Loan Forgiveness $104,537.12 $102,944.29 $56,109.37 $0.00

Electronic Application – IRS Interface

• Launched in September• The eApplication is now available for IBR,

ICR, Pay As You Earn or Lowest payment• Can be used by borrowers with Direct Loans

or FFEL Loans• Hosted on StudentLoans.gov. Borrowers can

access application directly or through loan servicers’ websites

• Uses IRS Data Retrieval Tool that is used on the FAFSA

• Retrieves the most recent tax information from two most recently completed tax years

• Electronically transmits application to loan servicer—no follow-up necessary unless AGI is unavailable or borrower wants to submit alternative documentation of income

• Can be used for initial applications or annual recertification

Electronic Application – Review

Electronic Application - Confirmation

Income-Driven Repayment Application

• Apply on loan servicer’s website

– Eligible to apply 60 days prior to repayment start date– Borrower is notified by servicer 90 days prior to

renewal date

• A ‘lowest eligible repayment option’ is available to borrowers unsure of which plan to select.

• If using alternative documentation of income, supporting documents, such as pay stubs, must clearly show how often (and how much) income is received.

• Documentation of income and family size must be submitted annually

• Option to complete application electronically and transfer prior year tax data from the Internal Revenue Service (IRS)

Repayment Options – Income Sensitive

• FFEL loans only• Monthly payment is based on monthly gross income• Must re-apply annually• Available for 5 years (The borrower will repay remaining balance under

a Standard repayment plan unless another plan is selected.)

Loans serviced by FedLoan Servicing:

1. Complete the Income Sensitive Repayment Request Form on the Payment-Related Forms section at MyFedLoan.org/forms.

2. Submit documentation of your most recent total gross income from all sources (pay stubs, etc.)

3. Mail or fax all required forms / documentation:

FedLoan ServicingP.O. Box 69184Harrisburg, PA 17106-9184

Fax: (717) 720-1628

Contact the appropriate servicer for loans not serviced by FedLoan Servicing

How to

Apply

Standard Repayment Example

Eligible Loan Debt - $31,000 (6.8% interest rate)

Standard Repayment

Months in Repayment 120

Monthly Payment $356.75

Total Interest Payment $11,809.83

Total Loan Payment $42,809.83


Standard Repayment


Monthly Payment $863.10




• This is the plan the borrower will have when entering repayment, unless the borrower requests otherwise

• The payment will be a fixed (equal) amount each month, although it could vary due to interest rate changes on a variable rate loan

• Monthly payments will be at least $50

• 10-year repayment term (Standard plan for Consolidation Loans is 10 to 30 years based on balance)

Graduated Repayment Example


Graduated


Monthly Payment Years Monthly Payment

1-23-45-67-8

9-10

$244.95$297.80$362.04$440.15$535.11




Graduated


Monthly Payment Years Monthly Payment

1-23-45-67-9

9-10

$592.63$720.49$875.93

$1064.90$1,294.65




• Payments start low and generally increase every two years

• 10-year repayment term (Consolidation Loans may have a term of 10 to 30 years based on balance)

• Monthly payment is never less than the amount of interest that accrues each month

• No single payment will be more than three times greater than any other payment

Extended Repayment Example


Extended Fixed

Extended Graduated

Months in Repayment 300 300

Monthly Payment $520.55 Years Monthly Payment

1-23-45-67-8

9-1011-1212-1415-1617-1819-2021-2223-24

25

$425.00$445.28$466.53$512.13$536.57$562.17$589.00$617.11$677.42$646.56$677.56$709.75$743.62

Total Interest Payment $81,165 $94,155.34

Total Loan Payment $156,165 $169,155.34


• Will pay a fixed or graduated payment amount

• Repayment term not to exceed 25 years

• FFEL borrowers must have more than $30,000 in outstanding FFEL Program loans (for new borrowers as of 10/07/1998)

• Direct borrower must have more than $30,000 in outstanding Direct Loans (for new borrowers as of 10/07/1998)

Public Service Loan Forgiveness (PSLF) 10 years

The borrower may qualify for loan forgiveness earlier than 25 years (20 years if under Pay As You Earn) if they work full-time for a qualifying public service organization and make on-time full monthly payments under the repayment plans listed below. Payments made under these plans will count toward the 120 monthly payments that are required to receive loan forgiveness through PSLF.

• 10-year Standard Repayment Plan• Income Based Repayment (IBR) Plan• Income-Contingent Repayment (ICR) Plan• Pay As You Earn Plan• Any other repayment plan if the monthly payment amount is paid is not less

than what would have been paid under the 10-year Standard repayment plan

For more information on PSLF, please refer to the PSLF Fact Sheet and Q&As: www.studentaid.ed.gov/publicservice

http://www.studentaid.ed.gov/publicservice

Repayment Schedule Estimator

Additional Resources

• Repayment Schedule Estimatorwww.myfedloan.org/billing-payment/payment-plans/repayment-schedule-estimator.shtml

• Repayment optionswww.myfedloan.org/billing-payment/payment-plans/index.shtml

• Repayment Calculatorshttp://studentaid.ed.gov/repay-loans/understand/planshttp://www.finaid.org/calculators/http://www.myfedloan.org/make-a-payment/calculators/index.shtml

• Federal Student Aid (FSA) Repayment Informationwww.studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp

http://www.myfedloan.org/billing-payment/payment-plans/repayment-schedule-estimator.shtml

http://www.myfedloan.org/billing-payment/payment-plans/index.shtml

http://studentaid.ed.gov/repay-loans/understand/plans

http://studentaid.ed.gov/repay-loans/understand/plans

http://www.finaid.org/calculators/

http://www.finaid.org/calculators/

http://www.myfedloan.org/make-a-payment/calculators/index.shtml

http://www.studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp

Servicing Resources

ServicerContact Information for Borrowers Contact Information for Schools

Phone Website Phone Website

Direct Loan Servicing Center (ACS) 1-800-848-0979 myedaccount.com 1-888-877-7658 myedaccount.com

FedLoan Servicing 1-800-699-2908 MyFedLoan.org 1-800-655-3813 MyFedLoan.org/schools

Great Lakes 1-800-236-4300 mygreatlakes.org 1-888-686-6919 mygreatlakes.org

Nelnet 1-888-486-4722 nelnet.com 1-866-463-5638 nelnet.com

Sallie Mae 1-800-722-1300 salliemae.com 1-888-272-4665 SallieMae.com/EDServicing

Documents

Repayment Loan Options