An Exit Program

1
An Exit Program
Information based on federal regulations in
effect through June 30, 2006
2
Steps To Manageable Repayment

• Gather information and prepare for repayment
• Understand repayment plans
• Learn options for postponing repayment
• Identify opportunities to manage your debt

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Schools Average Profile
4
Student Debt Profile
Note 3.50 interest rate assumed
Values shown are estimates and intended for use
as a guideline
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Repayment Ability
Monthly Student Loan Payment
Estimated Salary
Educational Payment as a Percent of Gross Monthly
Income
Manageable (8 or less)
Challenging (between 8 and 18)
Complex (18 or greater)
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Gather information and prepare for repayment
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Master Promissory Note (MPN) and Promissory Note

• States your promise to repay the loan
• Defines loan terms and your rights and
  responsibilities

8
Its an Obligation
You must repay your student loans even if you

• Do not complete your academic program
• Are not satisfied with your education from the
  school
• Do not find employment after leaving school
• Do not receive a payment notice from your lender

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Rights Responsibilities

• For Stafford Loans, you have a right to
• Request a written statement of your loan
• Prepay your loan without penalty
• Request a deferment or forbearance

• You also have a responsibility to
• Participate in an entrance and exit session
• Notify your lender/servicer of changes to your
  name, address and enrollment status
• Repay the loan and notify the lender/servicer
  when your ability to repay changes

Review your Exit Handbook for a complete list.
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Sorting Through the Information

• Identify your lender(s) and servicer(s)
• A lender or servicer will
• Send interest statements
• Calculate and monitor grace period
• Set your first payment due date
• Process payments
• Write or call if you are late with a payment
• Request an account statement fromeach lender

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Keep a File of Information

• Account statements
• Lender and servicer contact information
• Promissory notes
• Financial aid office correspondence
• Lender and servicer correspondence

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Phases of Your Federal Loans
Private loan borrowers should contact their
lender for details.
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They Differ from Federal Loans
Private or Institutional Loans Ask Questions

• Is there a grace period, and what is the length?
• When does repayment begin, and how long does it
  last?
• Can I postpone repayment?
• What are my deferment and forbearance options and
  requirements?
• How and when is interest calculated?
• What are your interest capitalization policies?
• Is there a repayment incentive?

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Understand repayment plans
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Thinking Beyond Today
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Repayment Plans
Standard
Monthly Payment Amount
Income-Sensitive
Graduated
Repayment Term
Helpful option if you initially require smaller
payments
Helpful option if you initially require smaller
payments adjusted regularly
Higher monthly payment lower interest cost
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Remember Prepayment

• Make extra payments or pay entire balance at any
  time without penalty
• Its an option for every repayment plan
• Pay less in interest expense because your
  principal balance is decreasing faster

18
Interest Capitalization

• Lender adds accrued interest to the outstanding
  principal balance of the loan
• Accruing interest on interest
• Frequency of capitalization varies by lender
• Less frequent capitalization is better

T.H.E. has a borrower-friendly interest
capitalization policy
Private loan borrowers should contact their
lender for details.
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Repayment Strategies Calculator

• www.theloanprogram.org/tlc/Calculators/RepayStrat
  egyCalc.aspx

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Learn options for postponing repayment
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Deferment Basics

• Postponement of repayment for a specific time
  period
• Apply and meet criteria
• Borrower responsible for interest on unsubsidized
  loans
• Accrues or can be paid
• Interest rate lower than in repayment (Stafford
  only)

Reduce total repayment pay accrued interest
during grace and deferment.
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Common Deferments

• In-School Deferment
• Economic Hardship Deferment
• Graduate Fellowship Deferment
• Unemployment Deferment

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Forbearance Basics

• Use only if you are not eligible for deferment or
  have exhausted deferment benefits
• Temporary postponement or reduction of payment
• Apply and meet criteria

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In-School Deferment

• Enrolled at least half-time at an eligible school
• No limit, as long as you continue to be enrolled

25
Economic Hardship Deferment

• Qualification based on a ratio of income to
  monthly student loan payments
• Ideal for early years of medical residency
• Must apply and qualify each year
• Available for up to 3 years

Find out if you may qualify by using our online
calculator www.theloanprogram.org/tlc/Calculator
s/HardshipCalc.aspx
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Unemployment Deferment

• Apply with documentation of employment status
• Granted in six-month intervals
• Up to 24 or 36 months of deferment
• Depending on date received Federal Stafford Loans

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Forbearance Basics

• Use only if you are not eligible for deferment or
  have exhausted deferment benefits
• Temporary postponement or reduction of payment
• Apply and meet criteria
• Interest accrues on both subsidized and
  unsubsidized loans
• Interest rate equals current repayment rate
• Interest capitalization occurs at the end of
  each forbearance period with some lenders

T.H.E. has a borrower-friendly interest
capitalization policy
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Repayment Timeline
Federal Stafford Loans Subsidized Unsubsidized
6-month Grace Period
Economic Hardship Apply each year, up to three
years
Repayment or Forbearance
6-mo. Post-Deferment Grace Period
Federal Perkins Loans on or after July 1, 1993
9-month Grace Period
Economic Hardship Apply each year, up to three
years
Repayment or Forbearance
Private Institutional Loans
Contact your lender (private) or school
(institutional) for details
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Loan Discharge

• Release of a borrowers obligation to repay his
  or her federal loan, either in whole or in part
• Death
• Disability
• Application process differs according to
  discharge situation

Private/Alternative Loan discharge terms vary by
lender.
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Identify opportunities to manage your debt
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Budgeting for Success

• Prevent financial trouble
• Learn how to be a smart consumer
• Prepare a secure future by setting and achieving
  goals

Wise borrowing and smart financial habits can
help lower your debt.
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Smart Financial Habits

• Get organized
• Determine your income
• Identify your expenses
• Balance your budget

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Get Organized

• Collect information
• Bills
• Account statements
• Receipts
• Know your income
• Track expenses with a spending journal

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Determine Your Income

• Total the Sources
• Employment
• Personal Savings
• Family Contribution

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Identify Your Expenses

• Fixed Expenses
• Rent/Mortgage/Association Dues
• Car payments
• Insurance premiums
• Child care
• Taxes
• Student loan payments

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Identify Your Expenses

• Variable Expenses
• Utilities
• Food
• Clothing
• Medical/Dental

• Household
• Transportation
• Credit card

Using credit cards is not a good option for
covering expenses you cannot handle.
You have the power to control your expenses.
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Is Your Budget Balanced?
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Expenses Exceeding Funds?

• Eliminate or modify budget items that you
  control
• Necessity vs. need
• Share split the cost
• Get a roommate
• Planned buying
• Loan consolidation
• Refinance your mortgage
• Consider automobile options

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Managing Credit

• Understand what is included in your credit report
• Maintain a high FICO score
• Pay all bills on time
• Open new accounts over time, not all at once
• Pay off debt, rather than moving it around to
  other credit cards

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Federal Consolidation Loan

• Simplify multiple student loans with one point
  of contact
• Reduce your monthly payment amount
• Lock in a fixed interest rate for up to 30 years

A Federal Consolidation Loan can make things
easier!
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Federal Loan Consolidation Will Be Changing
Information based on federal regulations in
effect through June 30, 2006
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Consolidation Requirements

• Must be in grace period or have entered repayment
  on loans selected for consolidation
• Includes loans in deferment or forbearance
• In-school loans are eligible after student
  requests early repay
• Eligible loans include
• Federal Stafford
• Perkins
• Others in handbook

Private loans are not eligible for Federal
Consolidation.
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Repayment Term

• Extending the term lowers monthly payments
• Length is limited based on your total
  outstanding student loan debt

44
Interest Rate

• Interest rate is the weighted average of
  consolidated loans rates
• rounded up to the nearest 1/8
• Grace period and deferment ideal times to apply
• Direction of rates around July 1 can influence
  timing

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Eligible Deferments

• Economic Hardship
• Pursuing a Graduate Fellowship
• Enrolled at Least Half Time
• Unemployment

Gain peace of mind and simplify your student loan
debt today.
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Selecting the Right Lender
The only differences between consolidation
lenders are service and incentives
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Selecting the Right Lender
Service

• Knowledge and experience
• Accessibility
• Credibility
• Long-term commitment

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Compare Incentives

• T.H.E. Repayment Bonus
• Monthly credit
• Starts immediately upon repayment
• Will not lose benefit
• Deferments/forbearances do not harm availability
• More than 95 of our borrowers in repayment
  receive the bonus

• Ask the Lender
• What is the incentive?
• Is there a waiting period?
• What happens if I miss a payment?
• What happens if I request a deferment?
• How many of your borrowers receive it?

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Compare Incentives
From U.S. News World Report
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I consolidated some of my loans while I was
enrolled in school this past year. Now what?
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Need to Know

• No grace period on existing consolidation loan
• Options
• Deferment
• Forbearance
• Minimum Payment
• Be proactive, contact your lender regarding
  repayment

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Consolidation Options

• Second Consolidation Loan
• Consolidate outstanding eligible loans separate
  from previous consolidation loan
• Re-Consolidate
• Combining previous consolidation loan with other
  outstanding eligible loans

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How to Decide

• Keeping them separate vs. re-consolidation
• Separate
• If you made the right choice on who holds your
  first consolidation loan, then it makes sense to
  create a second consolidation loan with that same
  lender
• Why?
• Maximize your savings
• Pay down the higher rate loan faster as finances
  allow

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How to Decide

• Keeping them separate vs. re-consolidation
• Re-consolidation
• If you find that another lender has a better
  reputation of service and a deliverable
  incentive, then bring all your loans together
  with that new lender (previous consolidated debt
  with recent consolidated debt)
• Why?
• Simplification and savings
• Loans at one place, one point of contact and one
  payment
• Minimize your monthly payment by maxing out your
  repayment term

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Second Consolidation Loan

• Application Process
• Submit your Consolidation Application
• List loans to be consolidated (e.g. recent
  Stafford) on page 2
• List previous consolidated debt on page 3
• To retain grace period, complete question 26
• Separate interest rate
• Typically one consolidation account with one
  payment

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Second Consolidation LoanRemember Your Repayment
Strategy

• Minimize Interest Expense
• Maximize your repayment term
• Pre-pay consolidation loan with higher interest
  rate as finances allow

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Re-Consolidation

• Application Process
• Submit your Consolidation Application
• List loans to be consolidated, including previous
  consolidated debt on page 2
• To retain grace period, complete question 26
• Manage repayment on previous Consolidation Loan
  during Stafford grace make payments, request
  deferment or forbearance
• Interest rate re-calculated
• New payment schedule issued

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Create Your Repayment Strategy
Monthly Student Loan Payment
Estimated Salary
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Consequences of Delinquency/Default

• Delinquent late monthly payment
• Collection activity
• Damage to credit rating

• Default failure to pay for 270 days
• Collection and legal activity
• Damage to credit rating for seven years or more
• Wages could be garnished
• Professional license could be suspended or
  revoked

Remember
Update your address and phone number with
lenders/servicers. Dont ignore mail.
Delinquency/Default terms may differ for private
and other federal loans.
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An Exit Program
Questions Discussion
Contact Us 888-843-0004 www.northstar.org