Prepared for NACARA Consumer Outreach Special Issues Student

Prepared for: NACARA Consumer Outreach: Special Issues – Student Loan Debt Wendy Badger Chief Compliance Officer ECMC Group, Inc.

Types of Student Loans • Title IV Federal Financial Aid • Federal Family Education Loan Program (FFELP) (no originations after 2010) • • Private Lenders Guaranty Agencies (insures the loans) • Direct Loans • • • U. S. Government is the lender Government contractors as student loan servicers PLUS (parent is borrower) • Perkins Loans • HEAL Loans (through U. S. Dept. HHS) • Private Loans

Federal Student Loans: The Players • Lenders • Servicers • Guaranty Agencies • Educational Institutions

The Players: Guaranty Agencies • Agreements with U. S. Department of Education (ED) • • 501(c)(3) non-profit organizations or state agencies Designated (by ED) guarantor for specific states Fiduciary duties to ED Default aversion and collection activity required by federal regulation

Life Cycle of Federal Student Loans FAFSA • Federal aid eligibility • Federal loan eligibility • Grants • Work Study In School • At least half time status • Federal loan payment deferred • Interest may accrue Grace • 6 months • Graduate • Withdraw • Drop below half-time status Repayment • Monthly payments • Standard payment • Incomedriven plans • Deferment • Forbearance Delinquent • 1 day past due • Default aversion assistance • 270 days past due = default Default • Required by regulation • Collection costs • Credit reporting • Treasury Offset • AWG • Rehabilitate • Consolidate • Subrogation (mandatory assignment)

Guaranty Agency Obligations • Guaranty agency due diligence efforts driven by regulation • • Default Aversion Assistance Request (DAAR) Default claim payments – transfers title Skiptracing efforts Collection efforts • Adding collection costs (proscribed by regulation) • Reporting default to consumer reporting agency • Certification for Treasury Offset Program • Initiation of administrative wage garnishment • Rehabilitation program • Subrogation/mandatory assignment to Department of Education

Guaranty Agency Obligations • Biennial program reviews of schools and lenders in FFELP • The College Place (access centers) • Financial literacy and outreach • Financial Awareness Basics • Believing the College Dream • Realizing the College Dream • PERSIST • College Nights • Training materials • Speakers • Scholarships

Federal Student Loan Repayment Options • Standard Repayment plan • Default plan, unless qualified and apply for income-driven repayment plan • 10 year repayment plan • Graduated Repayment plan • Payments start low, increase year by year (anticipates income increases) • Up to 10 years to repay • Extended Repayment plan • Loans originated on or after October 7, 1998 • Outstanding balance of principal and interest totaling more than $30, 000 • Up to 25 years to repay (depending on balance)

Federal Student Loan Repayment Options • Income-Driven Repayment plans • • Income-based repayment (IBR) Income-contingent repayment (ICR) Income-sensitive repayment (ISR) Pay As You Earn (PAYE) (Direct loans only)

Federal Student Loan: Suspension of Payments • Available for non-defaulted loans • Limits apply over the life of the loan (e. g. , 36 months available) • Deferment • Interest does not accrue on subsidized loans, but does accrue on unsubsidized loans (capitalized if not paid during deferment) • Mandatory for some situations (e. g. , active duty military, inschool) • Forbearance • Interest accrues and is capitalized on all loan types • Discretionary

Federal Student Loan: Discharge and Forgiveness • • Total and Permanent Disability Discharge Closed School Discharge False Certification Discharge Death Discharge Teacher Loan Forgiveness Public Service Loan Forgiveness (Direct Loans) Bankruptcy • Presumption of non-dischargeability • Subject to undue hardship standard

Free Resources for Borrowers • National Student Loan Data System (www. nslds. gov) • Tracks federally-insured student loans by Social Security number • Borrower access to their own federal student loan records • When, where, who, status – and who has them • Registration required, PIN protected • Additional Resources • www. finaid. org • www. studentaid. ed. gov • www. ombudsman. ed. gov

Questions? Thank you! Wendy Badger Chief Compliance Officer ECMC Group, Inc. (651) 325 -3652 wbadger@ecmc. org