WHAT EVERY FINANCIAL EDUCATOR SHOULD KNOW ABOUT FEDERAL STUDENT LOANS

U.S. Department of Education 2013WHAT EVERY FINANCIAL EDUCATOR SHOULD KNOW ABOUT FEDERAL STUDENT LOANS

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AgendaFinancial LiteracyResources - Applying & Paying for CollegeComparison ShoppingApplying for AidBudgeting and BorrowingManaging Debt

Loans and RepaymentNeed to KnowLoansDefault

ServicingFederal Loan ServicersServicing Issues and Challenges

#Financial LiteracyIt all begins here!

#4College ScorecardCollege NavigatorFinancial Aid Shopping SheetFree Application for Federal Student AidNet Price CalculatorFinancial Awareness Counseling Tool (FACT)Entrance and Exit CounselingRepayment Estimator #4Comparison Shopping - College Scorecard5

Available at: http://collegecost.ed.gov/scorecard/

#5Comparison Shopping - College Navigator6

Available on: http://nces.ed.gov/collegenavigator/

#6Comparison Shopping - Financial Aid Shopping Sheet7

More information on the financial aid shopping sheet is available at http://collegecost.ed.gov/shopping_sheet.pdf #7Apply for Aid - FAFSA

8Resources on this website are also available in Spanish.Takes less than 30 minutes to complete online at www.fafsa.govReal-time help is available by phone at 1-800-4FED-AID , or via on-line chatIRS Data Retrieval Tool pre-populates tax information: http://www.fafsa.ed.gov/help/irshlp8.htmDetermines families ability to contribute to cost of attendance 8Budgeting and Borrowing - Net Price Calculator

Available on: http://collegecost.ed.gov/

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Budgeting and Borrowing: FACT Tool

ExpensesFunds10Financial Awareness Counseling Tool (FACT) direct link: https://studentloans.gov/myDirectLoan/financialAwarenessCounseling.action?execution=e1s1 10Manage Debt - StudentLoans.gov

#11/4/201311Manage Debt - Entrance and Exit Counseling

NOTE: Exit Counseling does not include Manage Your Spending While in School.

Available on studentloans.gov12 12Manage Debt: Estimate Repayment Amount

13Repayment plans and loan payment calculators are available at: http://studentaid.ed.gov/repay-loans/understand/plans#estimator 13Stay Informed - StudentAid.gov

StudentAid.gov is available for both desktop and mobile device browsing #14Stay Informed - Social Media

Facebook: facebook.com/FederalStudentAid Twitter: twitter.com/FAFSA YouTube: youtube.com/FederalStudentAid #15Loans and RepaymentWhat borrowers should know

#11/4/201316Need to Know - Identify LoansFederal Student Loans - The National Student Loan Data System (NSLDS)Access NSLDS using your Federal Student Aid PIN at www.nslds.ed.gov Private Loans: 3 key placesCredit ReportFinancial Aid OfficePersonal Records and Files

LOAN#11/4/201317Need to Know - Loan Servicers (More to come) Collects payments on a loanResponds to customer service inquiriesPerforms other administrative tasks associated with maintaining a loan on behalf of a lender

If unsure of who Federal Student Loan Servicer is, look it up on www.nslds.ed.gov

#11/4/201318Need to Know - NSLDS Student Data Summary

#11/4/201319Need to Know - NSLDS Loan Detail

#11/4/201320Need to Know - My Student Aid - 2014

Coming Attractions!#11/4/201321Loans - Federal Student Loan Programs#11/4/201322Loans How Payments are AppliedFirst payment on:

$10,000 loan

Interest rate: 3.86%

Monthly payment amount: $100.58

#11/4/201323Loans Repayment Plans FFEL and DL* - Conditions applyIncome-DrivenLevelStandardExtended*GraduatedIncome-Based*Income-Contingent*Pay As You Earn*#Loans - Interest Simple Daily Interest The simple in simple daily interest means that interest does not compound absent a specific reason

The daily in simply daily interest means that interest accrues every day

Lets walk through the calculation to determine how much interest accrues in one day on a $10,000 loan with an interest rate of 3.86%

(Interest Rate Days in Year) Outstanding Principal Balance = Annual Interest

(0.0386 365) $10,000 = $1.06

#Loans - Repayment Plan SummaryBilly Borrower has $35,000 in Direct Loan debt, which has an interest rate of 3.86%. His income is $30,000, he is single, and he lives in Indiana. His income increases at a rate of 5% per year. Repayment PlanInitial PaymentFinal PaymentTotal PaidTotal Paid in InterestTotal Time in RepaymentForgiveness10-Year Standard$352-$42,244$7,24410 years-Graduated$196$590$44,032$9,03210 years-Extended$182-$54,624$19,61425 years-Extended-Graduated$113$331$59,711$24,71125 years-Income-Based$160$352$48,557$13,55715 yr., 5. mo.$0Pay As You Earn$106$352$51,283$20,75520 years$4,479Income-Contingent$231$273$46,822$11,82215 yr., 5. mo.$0#Loans - Repayment Plan SummaryRepayment PlanInitial PaymentFinal PaymentTotal PaidTotal Paid in InterestTotal Time in RepaymentForgivenessConsolidation Standard$209-$50,285$15,28520 years-Consolidation Graduated$123$369$54,296$19,29620 years-Extended$182-$54,624$19,61425 years-Extended-Graduated$113$331$59,711$24,71125 years-Income-Based$160$352$48,557$13,55715 yr., 5. mo.$0Pay As You Earn$106$352$51,283$20,75520 years$4,479Income-Contingent$231$273$46,822$11,82215 yr., 5. mo.$0If Billy consolidates all his federal student loans, the Standard Repayment Plan and Graduated Repayment Plan will have an extended repayment period.#Loans - Consolidation: LoanConsolidation.ed.gov

Interest rate is weighted average of consolidated loansInterest rate is rounded to nearest higher 1/8 of 1%#Loans - Repayment Period for Consolidation LoansFor standard and graduated plans, based on total educational indebtednessThis includes:Federal student loans that you consolidateFederal student loans that you do not consolidatePrivate student loans (that you cannot consolidate)Private student loan debt considered toward repayment period cannot be more than amount of the consolidation loanIf your Total Education Loan Indebtedness isyour repayment period will beAt leastLess than-$7,50010 years$7,500$10,00012years$10,000$20,00015 years$20,000$40,00020 years$40,000$60,00025 years$60,000-30 yearsTo count private student loans toward repayment period, list them on consolidation application under the Loans You Do Not Want to Consolidation section.

#Loans - Public Service Loan ForgivenessBorrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLFAccording to the IRS, the forgiven amount is not treated as taxable incomeStudentAid.gov/PublicService#3011/4/2013Loans - Deferment & Forbearance Reasons#Default - What happens if you cant afford your repayment?Contact loan servicer to discuss optionsMissing payments can have negative consequences

If a loan becomes more than 270 days delinquent, the loan defaults leading to even more severe consequences #Default - Consequences of Default#

Federal Loan ServicingDepartment role and responsibility #11/4/201334Servicing Landscape Define ItFederal Loan Servicer An entity that services Title IV loans owned by the Department of Education. These loans include, but are not limited to, William D. Ford Federal Direct Loan (Direct Loan) Program loans and Federal Family Education Loan (FFEL) Purchased Loans, more simply referred to as federally-owned loans.

TIVAS An internal acronym used by FSA which stands for the Title IV Additional Servicers. In communications with schools, borrowers, and the financial aid community, FSA uses the term federal loan servicers.

Not-For-Profits (NFP)Not-For-Profit awarded federal loan servicing contracts under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation.#

Federally-Owned LoansWilliam D. Ford Federal Direct Loan (Direct Loan) and FFELP Purchased Loans (PUT), held by the Department

PUTLoans made under FFELP by lenders and subsequently purchased by ED

Split Loan Servicing Borrowers who have more than one servicer of their Direct Loan and FFEL PUT (federally-owned loans)

Servicing Landscape Define It#

Origination and Disbursement System

OriginationDisbursement Loan AllocationServicer Assignment Booked Loan: occurs when the origination and disbursement system accepts an origination record; links p-note to the record and accepts actual disbursement.

The federal loan servicer is assigned upon booking of loan. * Direct Loan Servicing Center (ACS) DecommissionFederal Loan Servicers TIVAS#37Federal Loan Servicers NFP - TransfersNFP Facts:

To seed the NFP servicers, we transferred Direct Loan borrower accounts that were assigned to the Direct Loan Servicing Center (ACS / Xerox).When we transfer a student or parent borrower to a servicer, the new servicer will correspond with the borrower after the transferred loans have been fully loaded to the system.As of April 2013 (due to the Sequestration), the implementation of additional NFPs was placed on hold.

#Federal Loan Servicers All Federal Loan Servicers must comply with legislative and regulatory requirements.Through the multi-servicer borrower-centric approach schools may experience different processes and procedures offered by the servicers. Schools see many; but Borrowers see ONE! Together with our servicers, we work to serve borrowers and schools as efficiently as possible to:

Educate and inform borrowers of the tools and options available to assist in the management of their student loansOffer multiple repayment options tailored to borrower preferences (i.e. online payments, ACH, check, etc.)Provide self-service tools for borrowers and options to receive bills and/or correspondence electronically

#Borrowers with federally-owned loans serviced by more than one federal loan servicer.

Ongoing processes to resolve situations where a borrowers federally-held loans are assigned to two or more federal servicers.

Federally-owned and commercial loans may still be split among servicers.

Consolidation sometimes viable option, but not in all circumstances.

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Split Servicing #40FedLoan (PHEAA) MOHELA Cornerstone AspireNelnet ESA/Edfinancial Granite State OSLA VSAC Managing Change Multi-Servicer EnvironmentRequirement changes evolve from regulatory changes, policy updates, and new business decisions.#41Looking Back - Servicing Issues and Challenges Borrowers

Why did my loan get sold to a new servicer? Loan status discrepancies Payments made to prior servicer not applied timely Confusion about repayment options Application and documentation requirements Selecting PAYE for new consolidations

#42 Redesign of on-boarding communications Coordination and collaboration with previous servicer Extended call center hours for problem resolution Experienced and dedicated resources to resolve data issues Communicating with borrower in the way they choose Targeted communications and options for recently transferred borrowers (to assist with delayed payment posting)

Looking Back - Servicing Key Improvements Borrowers #43

Increase Customer Awareness of IDR Plans Implemented Electronic Income-Driven Application:Can be used by borrowers with ED-held loans (Direct Loans or FFEL)Can be used by borrowers with commercially held FFEL loans serviced by an entity that also services ED-held loansOn StudentLoan.govRetrieves the most recent tax information from two most recently completed tax years

Borrowers Looking Back - Servicing Key Improvements #44In order to provide the best service to our customers, our servicing contracts are structured to allow for servicer creativity and innovation. However, there are times when decisions are made to standardize our servicing processes.

Why the need for consistency or standardization? Standardization makes sense when differences in servicer processing cause different results to borrowers in the same circumstance.

Looking Back - Decisions to Standardize Examples: Decisions to Standardize

Forbearance Limits Capitalization Prepayments

45#45Federal Loan ServicersFederal Loan ServicersBorrower Contact #Aspire Resources Inc.1-855-475-3335CornerStone1-800-663-1662ESA/Edfinancial1-855-337-6884FedLoan Servicing (PHEAA)1-800-699-2908Granite State GSMR1-888-556-0022Great Lakes Educational Loan Services, Inc.1-800-236-4300MOHELA1-888-866-4352Nelnet1-888-486-4722OSLA Servicing1-866-264-9762Sallie Mae1-800-722-1300VSAC Federal Loans1-888-932-5626#Contact UsThere are several ways to contact the U.S. Department of Education to discuss ones financial aid:Online: StudentAid.govTelephone: 1-800-4-FED-AIDEmail: StudentAid@ed.gov

#Our Contact InformationElizabeth Coogan, Senior Advisor, Federal Student AidElizabeth.Coogan.@ed.gov202-377-3825Ian Foss, Program Specialist, Federal Student AidIan.Foss.@ed.gov202-377-3681Cynthia Battle, Program Manager, Federal Student AidCynthia.Battle@ed.gov202-377-3261#Questions?

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