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So You Have Student Loans... The good news is, you are not alone! More than 37 million Americans have some student loans, with an average $23,300 of debt in 2011. Among those borrowers, 10% owe more than $54,000 and 3% more than $100,000, the New York Times reports. In this special edition of VNews, we will be covering the complex issue of student loans. Whether it’s navigating your repayment options, figuring out the AmeriCorps forbearance request form, or just understanding basic student loan terminology, South Carolina Campus Compact is here to help make this process less stressful and overwhelming.
College Cost Reduction and Access Act On September 27, 2007, President Bush signed the College Cost Reduction and Access Act of 2007 (“CCRAA”) into law. In addition to other amendments to the Higher Education Act of 1965, the CCRAA created two new federal programs: a new Public Service Loan Forgiveness program and a new Income-Based Repayment plan (IBR) for the repayment of federal loans. The Public Service Loan Forgiveness Program offers forgiveness for outstanding Federal Direct loans for those individuals who make 120 qualifying payments after October 1, 2007, while working full-time in a “public service job” as defined in the Act. The new Income-Based Repayment plan helps to make repaying education loans more affordable for low-income borrowers, such as an AmeriCorps member living on a stipend. IBR will become available in July, 2009. On October 23, 2008, the Department of Education published a final rule that details the implementation of the Act. It is important to note that the final rule recognizes full time AmeriCorps service as equivalent to a public service job. The Corporation has developed a set of Frequently Asked Questions based on the Department of Education’s final rule. These FAQs are designed to answer a variety of basic questions that AmeriCorps members/alumni might have based upon their individual loan status. If you have additional questions on the impact of the Public Service Loan Forgiveness Program and/or the Income-Based Repayment plan for AmeriCorps members or alumni, please send your questions to: AmeriCorpsloanforgiveness@cns.gov.
Making the Most of Your Education Award AmeriCorps Education Awards—recently renamed the Segal AmeriCorps Education Awards after Eli Segal, one of the pioneers of the national service movement and the first CEO of the Corporation—are a post-service benefit received by AmeriCorps members, including those supported through VISTA and the National Civilian Community Corps (NCCC). To see a map of the continental United States, with markers indicating the locations of colleges and universities that match the Segal AmeriCorps Education Award for their students, click here. Using the navigation pane located at the left side of the map, you can zoom in and out and move to different locations on the map. When you click on a marker, a balloon will appear with the name and location of the institution and a link to view more detailed information. If you are experiencing difficulty, please click here for Google Maps help information and system requirements. Alternatively, a list of institutions is provided below the map, organized by state.
H ow t o C r e a t e a Fo r b e a r a n c e Re q u e Step 1: Sign into your AmeriCorps account
Step 3: Review all of your AmeriCorps information. It is important that it is the most up to date. Also, make sure to list your current term of service
Step 2: On the left side of your screen, select “Create Forbearance Request�
Subsidized Loans Subsidized loans are awarded on the basis of financial need. You won't be charged any interest before you begin repaying the loan because the federal government subsidizes the interest during this time.
Unsubsidized Loans
Monthly Payment
Unsubsidized loans charge interest from the time the money is first disbursed until it is paid in full. The interest is capitalized, meaning that you pay interest on any interest that has already accrued. One way to minimize how much interest accrues is to pay the interest as it accumulates.
Your monthly payment will be determined by the amount you borrow, the length of the repayment period and the interest rate. Even considering these factors, generally the more you borrow, the higher your payment will be. Even if you borrow very little at a low interest rate, the minimum monthly payment can be no less than $50.00.
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Step 4: Select “Search for Institutions” if your loan came from your university, input your school’s name. If your loan came from a bank or loan provider, you will input their name. If you do not know, refer to your FAFSA or any documentation you may have received.
Step 5: After you have selected your institution, click ok. The AmeriCorps will electronically generate a forbearance request on your behalf to submit. Please note– Some providers require paper documentation of your AmeriCorps service as well.
Interest Rate
Repayment Period
Grace Period
Most student loans have a variable interest rate that could go as high as 8.25%. The interest rate is based on the 90-day T-Bill, and adjusted every July 1. If you have an unsubsidized loan, the interest rate will affect the amount accruing or the amount of your interest payments if you are paying accumulated interest.
The standard repayment period is 10 years. However, when you go into repayment you will have the option to choose other terms. For example, you may extend the repayment period in order to make your monthly payments more affordable. Be aware that this means it will not only take you longer to be free of student loan debt, but you will be paying more interest over the life of the loan.
The grace period is the time between when you leave school and when your first payment will be due. This period is usually six months. Remember that leaving school includes withdrawing and dropping below half-time enrollment.
Tax Implications? What Tax Implications? The Segal AmeriCorps Education Award, unlike most other forms of scholarships and fellowships, is subject to federal tax in the year the payment is made. It is considered taxable income regardless of whether it’s used for current educational expenses or to repay a qualified student loan. When and how much of the education award you redeem may have an impact on your overall income tax responsibility. If you use the entire amount of your education award in one calendar year, you must include the entire amount as income on your taxes for that year. If you redeem only a portion of your education award in one calendar year, you will be responsible for any taxes owed on that portion. Interest that is paid on qualified students loans is also subject to income taxes in the year it is made to the loan holder. The Trust DOES NOT deduct taxes from your education award or interest payments. If your education award and interest payments total more than $600.00 in a calendar year, in January of the following year, the Corporation will send you a Form 1099 to be used in preparing your income tax return. The total sum of interest payments and the Segal AmeriCorps Education Award payments are listed together on the 1099 form.
Tax Relief While you are responsible for taxes on your education award and other AmeriCorps benefits, you may be eligible for other tax relief through the Taxpayer Relief Act of 1997. Issues about income taxes are very complicated. The important point to remember is that you should consider the tax consequences of any decisions you make about when and how to use your education award. Contact a tax professional or the Internal Revenue Service for details. IRS Publication 970, Tax Benefits for Education explains tax benefits that may be available to members who are using education awards to pay for current educational expenses or to repay qualified student loans.
Defer or Forbear: What’s the Difference? You’ve heard the terms at your Pre-Service Orientation but
Forbearance, however, occurs if you can't make your sched-
what do they mean? A deferment is a period during which
uled loan payments, but don't qualify for a deferment, your
repayment of the principal balance of your loan is temporari-
loan servicer may be able to grant you a forbearance. With
ly delayed. During a deferment, you do not need to make
forbearance, you may be able to stop making payments or
payments. What’s more, depending on the type of loan you
reduce your monthly payment for up to 12 months. Interest
have, the federal government may pay the interest on your
will continue to accrue on your subsidized and unsubsidized
loan during a period of deferment.
loans (including all PLUS loans).
Learn more about when and how to defer or forbear at http://studentaid.ed.gov
Direct Consolidation Loan
Principal
Default
A federal loan made by the U.S. Department of Education that allows you to combine one or more federal student loans into one new loan. As a result of consolidation, you will only have to make one payment.
The total sum of money borrowed plus any interest that has been capitalized.
Failure to repay a loan according to the terms agreed to in the promissory note. You may experience serious legal consequences if you default.
Consolidation The process of combining one or more loans into a single new loan.
Cancellation
This occurs when a borrower meets specific PLUS Loan requirements that permit nullifying the borrower's obligation to repay a designated por- A loan available to graduate students and partion of principal and interest on a student loan. ents of dependent undergraduate students for Also called discharge of a loan. which the borrower is fully responsible for paying the interest regardless of the loan status.
Beginning Repayment– Know Your Options Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you have received and find the loan servicer for your loans using the National Student Loan Data System (NSLDSŽ). Private student loans you may have received are not federal loans and are not included in NSLDS.
Repayment Plan
Eligible Loans
Monthly Payment and Time Frame
Standard Repayment Plan
- Direct Subsidized and Unsubsidized Loans - Subsidized and Unsubsidized Federal Stafford Loans - All PLUS loans
Payments are a fixed amount of at least $50 per month. Up to 10 years
Graduated Repayment Plan
- Direct Subsidized and Unsubsidized Loans - Subsidized and Unsubsidized Federal Stafford Loans - All PLUS loans
Payments are lower at first and then increase, usually every two years. Up to 10 years
Extended Repayment Plan
- Direct Subsidized and Unsubsidized Loans - Subsidized and Unsubsidized Federal Stafford Loans - All PLUS loans
Payments may be fixed or graduated. 12-25 years
Income-Based Repayment Plan (IBR)
- Direct Subsidized and Unsubsidized Loans - Subsidized and Unsubsidized Federal Stafford Loans all PLUS loans made to students - Consolidation Loans (Direct or FFEL) that do not include consolidated PLUS loans made to parents
Your maximum monthly payments will be 15 percent of discretionary income, the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence (conditions apply). Up to 25 years.
Income-Contingent Repayment Plan
- Direct Subsidized and Unsubsidized Loans - Direct PLUS Loans made to students - Direct Consolidation Loans
Payments are calculated each year and are based on your annual income*, family size, and the total amount of your Direct Loans for up to 25 years. *If you are married, your spouse's income is included.
Income-Sensitive Repayment Plan
- Subsidized and Unsubsidized Federal Stafford Loans - FFEL PLUS Loans made to students - FFEL Consolidation Loans that do not include a PLUS loan made to parents
Your monthly payment is based on annual income. Your payments change as your income changes. Up to 10 years
Direct Loan
Federal Family Education Loan (FFEL) Program
directly from the U.S. Department of Education under the Direct Loan Program.
A federal student loan, made through the WilFederal Perkins Loan liam D. Ford Federal Direct Loan Program, for Under this program, private lenders provided which eligible students and parents borrow loans to students that were guaranteed by the directly from the U.S. Department of Education federal government. These loans included Sub- A federal student loan, made by the recipient's school, for undergraduate and graduate stuat participating schools. Direct Subsidized sidized Federal Stafford Loans, Unsubsidized dents who demonstrate financial need. Loans, Direct Unsubsidized Loans, Direct PLUS Federal Stafford Loans, FFEL PLUS Loans, and Loans and Direct Consolidation Loans are types FFEL Consolidation Loans. As a result of the Federal Pell Grant of Direct Loans. Health Care and Education Reconciliation Act of 2010, federal student loans under the FFEL ProA federal grant for undergraduate students gram are no longer made by private lenders. with financial need. Instead, all new federal student loans come