Financial Wellness Curriculum Consolidation Financial Wellness Curriculum Consolidation

Financial Wellness Curriculum Consolidation

Financial Wellness Curriculum Consolidation More information available at You. Can. Deal. With. It. com. THIS PRESENTATION HAS BEEN DEVELOPED BY AND PAID FOR BY PHEAA. The information contained herein is believed to be accurate at the time of printing. Due to the rapidly changing nature of the law and the industry, information contained in this document may become outdated, and PHEAA/AES does not guarantee the accuracy of the information herein. You should verify that this information is correct. Any Stafford or PLUS loan first disbursed on or after July 1, 2010 must be obtained directly from the federal government through the Federal Direct Loan Program (FDLP). Please contact the financial aid office at your school for additional information. 1

Objectives • • • 2 What Is Student Loan Consolidation? Qualifying Loan Types Stay Informed Consolidation Eligibility Monthly Savings / By the Numbers Extended Repayment Terms Consolidation Features Deferment and Forbearance Advantages and Disadvantages Tools and Resources

What Is Student Loan Consolidation? • Student loan consolidation allows borrowers to combine two or more existing student loans into a single new loan. • An extended repayment term offers a lower monthly payment. • Interest rate becomes fixed at the time of consolidation. • Borrowers with only one student loan may consolidate to receive these benefits as well. 3

Qualifying Loan Types Eligible for Consolidation » » » » 4 Federal Family Education Loan Program (FFELP) Perkins Loans (formerly National Direct Student Loans) William D. Ford Federal Direct Loans Supplemental Loans for Students (SLS) Health Professional Student Loans (HPSL) Nursing Student Loans Some existing consolidated loans

Stay Informed Regulation Changes » No longer eligible for consolidation • Spousal Consolidation • Early Repayment Consolidation » William D. Ford Federal Direct is the only authorized lender for federal consolidation. » Servicer for the consolidated loan can be selected by the borrower. 5

Federal Loan Consolidation Eligibility Criteria » Loans must be in repayment status. » Loans must be less than 270 days past due as of the scheduled disbursement date for the new consolidation loan. » A minimum loan balance may be required. 6

Monthly Savings Standard consolidation loan at a fixed interest rate of 7% for 10 years* Loan Amount $20, 000 $40, 000 $60, 000 Current Payment $232 $464 $696 Estimated Consolidation Payment $155 $282 $399 Monthly Savings $77 $182 $297 *Weighted average of the interest rates of the underlying loans rounded up to the nearest 1/8 of 1%. 7 (The amounts listed are estimates. Pease contact your servicer for your precise loan terms. )

By the Numbers Consolidated vs. Unconsolidated Loan Program Monthly Installment / Repayment Term Total Repayment Amount Unconsolidated* $294. 20 / 120 months $26, 500. 00 (principal) $ 8, 804. 00 (interest) $35, 304. 00 Consolidation $189. 00 / 240 months $26, 500. 00 (principal) $18, 859. 76 (interest) $45, 359. 76 *Based on loan balance of $26, 500 at 6. 0% fixed interest rate at a Standard Repayment. (The amounts listed are estimates, please contact you servicer for your precise loan terms. ) 8

Extended Repayment Terms Total Education Debt Max Repayment Term $ 0 $ 7, 500 $10, 000 $20, 000 $40, 000 $60, 000 10 years 12 years 15 years 20 years 25 years 30 years to to to $ 7, 499. 00 $ 9, 999. 99 $19, 999. 99 $39, 999. 99 $59, 999. 99 greater Although private loans are not eligible to be included in a federal consolidation, it is recommended that borrowers list their private loans on their consolidation application to increase their total education debt in order to increase the repayment term. 9

Consolidation Features Repayment Options » Level Repayment » Graduated Repayment » Income-Sensitive Repayment---Eligibility is based on comparing the monthly installment to a borrower’s gross monthly income. (For FFELP loans only. ) » Income-Based Repayment (IBR)---The IBR monthly payment amount is based on income (or combined income with spouse, if married), family size, and applicable loan debt and may be adjusted annually depending on these factors. Loan forgiveness may be granted after 25 years of qualifying IBR payments. 10

Consolidation Features Repayment Options » Income-Contingent Repayment (ICR)---Eligibility is based on income (or combined income with spouse, if married), family size, and total federal Direct Loan debt. Monthly payments may be adjusted annually and loan forgiveness can be granted after 25 years of qualifying ICR payments. » Pay As You Earn---Pay As You Earn is an income-driven repayment based on gross income (or combined income with spouse, if married), and family size and may be adjusted annually depending on these factors. Loan forgiveness is granted after 20 years of qualifying payments instead of 25. Do your homework to determine what repayment option is most beneficial for you! 11

Consolidation Features Loan Forgiveness • 25 -Year Loan Forgiveness---Available for Income. Contingent Repayment and Income-Based Repayment • 10 -Year Public Service Forgiveness---Available through the William D. Ford Federal Direct Program for Income. Contingent Repayment and Income-Based Repayment. 12

Deferment Options • The deferment options* available to consolidated loan borrowers are the same as those for borrowers who have unconsolidated loans. • Borrowers are eligible for the unused deferment time on their underlying loans only for the following deferments: » Economic Hardship Deferment » Unemployment Deferment * Deferment options may vary by the date of the borrowers first student loan disbursement. 13

Forbearance Options • Forbearance is a temporary suspension of a borrower’s obligation to remit monthly payments. • Forbearance options are identical to those offered on FFELP loans: » Up to 36 months of Student Loan Debt Burden Forbearance • If the borrower qualifies » Temporary Hardship Forbearance • No income requirements • Maximum allotted time is determined by lender 14

Consolidation Calculator Visit: https: //studentloans. gov/my. Direct. Loan/mobile/repayment. Estimator. action 15

Advantages of Consolidation • • 16 Fixed interest rate Loans with one lender Single monthly payment Extended repayment period Lower monthly payment No application fees or credit checks No prepayment penalty Choice of servicer

Disadvantages of Consolidation • • • 17 Longer repayment period Possible greater interest paid over life of loan Interest rate may be slightly higher due to rounding May lose loan forgiveness benefits Potential loss of loan incentives on underlying loans

Tools and Resources • NSLDS. ED. GOV---Find all of your loans for consolidation. • Studentloans. gov--- Submit your consolidation applications online. • Studentaid. ed. gov---Research your repayment options, forgiveness programs, etc. 18

Objectives • • • 19 What Is Student Loan Consolidation? Qualifying Loan Types Stay Informed Consolidation Eligibility Monthly Savings / By the Numbers Extended Repayment Terms Consolidation Features Deferment and Forbearance Advantages and Disadvantages Tools and Resources

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