Monday, April 19, 2010

LIVEBLOG: Loan Exit Counseling Session

"You are all officially deeply in debt" - Jennifer Hulvey, the Director of the Law School's financial aid office kicks us off.  (Editor's note: There is some critical information about the interplay between the two Virginia Loan Forgiveness Programs below.)

She's happy to meet with all of us, 1 on 1, sometime after this session.

Here are the goals for the talk:
(1) The Official Federal Loan Exit Counseling - it's required by law, and a little a dry.  There will be link that we have the follow that will have to be sent around afterwards.
(2) The Options YOU Have for Loan Repayment - and how to get it set up.
(3) Virginia Loan Forgiveness Program

(1) The Official Federal Loan Exit Counselin
  •  "The consequences of not paying back your loans are dire."
  •  Note that the new health care legislation- your loan has likely been / will be sold to the federal government.  But the feds are not actually servicing these things.  They have contracted with five servicers to service the loans, which are basically the same people who were servicing the loans before.  Meet the new boss . . .
    • If you have issues sorting out the paperwork, let her help you.
    • Keep a folder that tracks every piece of information.  Just capitalize the cost of manillia enevelope on top of your existing debt. 
    • You should have gotten notices in your mailboxes. 
  • All current students will have to sign a new promissory note for the fall (related to move to direct lending).
  • Money quote: "When you signed that promissory note, you made a promise to pay that money back . . . even if you can't find a job or you were unhappy with your education."
  • DO NOT DEFAULT ON YOUR LOANS.  Apparently this is the number one point, because it will be in your credit record forever.  
    • Default = no payments in 270 days.
      • No future student aid
      • Seize tx refunds
      • Lose profesisonal license
      • Wages garnished.
      • Lose options for deferment, forebearance, loan forgiveness.
      • Can receive bad credit rating and be subject to legal actions, collections.
      • If you do pay it back, you can avoid all of this bad stuff.
  • Repayment Options:
    • Standard*:
      • Fixed payments
        • $ 50 minimum ("When I went to grad school, my monthly payments were 50 dollars a month for ten years."  We get the feeling that some folks here might be paying a little more.)
        • Could see as much as 1,500 or 2,000/month depending on debt.
      • Loan repaid in full w/in 10 years
      • * In the case of a consolidation loan, the minimum monthly paymanet and the maximum may increase.
      • Six month grace on stafford, two month on grad plus.
        • You can request a six-month grace on Grad plus.
      • Fastest way, and least total repayment.  
    • Graduated
      • Monthly payments start low and increase over time.
      • Payment will never be greater than three times the initial payment. 
        • But this means the initial payment will be calculated according
      • On a 100k, the initial payment would only be around 500, but you will have a total payback of 147k - about 10k more than initial option. 
    • Income sensitive
      • Similar to graduated, but will fluctuate based on your income level.  
    • Extended repayment
      • Only available to new borrowers after 1998; should be most of you.
      • Only for federal student loan debt > 30k ("But that shouldn't be a problem for most of you!")
        • Average debt for graduating 3Ls at UVA Law = $103,000. 
      • Can extend payment for up to 25 years. 
      • Can make standard or graduated payment over 25 years.
      • You are going to pay a lot  more interest.  In fact, you will pay more than interest than you originally borrowed.  108k of interest on a 100k loan. 
    • Income based repayment option
      • Lot of press, the new  Virginia Loan Repayment program is tied to it.
      • For those experiencing aprtial financial hardship.
        •   "Most jobs in excess of 75k/year will not qualify."
      • Payment amount adjusted
      • Term may be extended ot 25 years.
      • If balance after 25 years, remainder is forgiven. 
        • 10 years if in federal public service
      • There is a marriage penalty for IBR - when IBR does the calculation, it looks at your combined income, but only your debt, not the debt of your spouse.  
      • You can negatively amortize under IBR - you can make payments that are less than the interest, you can come out from owing more than you started.
        • "You need to take a hard look at what you want to do."
          • if you want to pay back the least amount possible, you probably shouldn't do this UNLESS you are going to public service.
  • Other options
    • In all cases you can
      • Prepay your federeal student loans w/out penalty
      • Change annually your repayment plan
      • Be eligible to deduct up to 2,500 on your federal 1040 of interest paid.
  • Consolidation
    • Combines different types of federal loans from different lenders and various interest rates into one loan.
    • Must be out of school.
    • Repayment will begin immediately after school. 
    • Fixed interest rate.  
      • theoretically a weighted average of your other interest rates. 
    • Repay 10-30 years based on loan debt.   
      • likely that they will try to extent your repayment period, which will increase total interest.
    • If you consolidate under the federal government direct lending program, you will get eligibility for federal public service loan forgiveness option (10year forgiveness + IBR).  You must do this in order for your "clock" for making payments under the program. 
        • there is an "online calculator" that will tell you whether or not you qualify for all the various options.
        • Can apply for direct lending consolidation here.
    • NB: If you took out loans prior to 2007 via the BoA "sweetheart deal" with UVA, you could lose those benefits through consolidation. 
    • Could lose deferment options.
  • NSLDS database (google it) has also your loans reported it.  You can use this to help keep up with your loans. 
  • Deferment
    • Entitled to defer under certain circumstances.
    • When you defer, payments are post-poned, and the government pays the interest on the subsidized stafford loans.
    • Defertment types:
      • In school at least half-time.
      • Unemployemed or under-employment
        • 24 months at most
      • Economic hardship. 
  • Forebearance
    • Interest on debt is not paid.
    • Must  keep making payments on it while you are 
  • Discharge
    • Death, total and pernament disability
      • Faking own death????
    • School closes before education completed.  
    • Some other weird stuff that will not happen. 
(2) Repayment Strategies
  • Read your mail. 
  • Budget accordingly
  • Use AutoPay, there is an interest rate deduciton. 
 (3) Virginia Loan Forgiveness Program
  • You guys are automatically qualified for VLFP I, but you can request to switch to VLFP II. "I can't think of a lot of reasons you wouldn't be able to switch - we put some risk language in their to protect the law school as we are trying ourselves to programs that are outside the Law School's control."  That's good, and something not mentioned to in the original announcement.
  • The details are here:
  • The new program assumes that you are qualified for federal public service loan forgiveness - YOU must set this up. 
    • Whether or not VLFP II is right for you depends heavily on you staying in qualifying employment.
    • Under VLFP I, it's based ona 10-year repayment schedule, and does NOT follow IBR.  


      Anonymous said...

      Is anyone else upset that they put slips of paper in our mailboxes including our name, SSN, address, phone number, DOB, and driver's license number, without letting us know? I check that mailbox once every two months; I don't even know how long it sat in there.
      Maybe I shouldn't be concerned. They did use a single staple in the middle of the page to protect my privacy, after all.

      Anonymous said...

      Does reading this blog post satisfy the requirement under federal law that I receive exit counseling? TIA!

      Anonymous said...
      This comment has been removed by a blog administrator.