Tagged: repayment

“Recalculating”…. Great Tools to “Navigate” Your Loan Repayment

Sad commentary on my professional life… I get excited (okay maybe even “giddy”)  every time I discover a new online calculator that helps make loan repayment more understandable and easy.   I collect calculators like other people collect  coins, stamps or sports memorabilia.  But the good news is that  I am now prepared to share the most price pieces of my  “loan repayment calculator” collection with you.

Here are some frequently asked questions or scenarios related to loan repayment and the links to online calculators that will help “estimate”  an  answer for you.  My one disclaimer … some of the sites are specific to individual companies or private enterprises . I am in no way endorsing these sites or companies above any other competing sites and companies.  I have just found the links below to be very useful in lifting the “veil of secrecy” from loan repayment.  Of course the most effective way to use these calculators is to also schedule an individual loan repayment counseling session with our office!

How much will I pay in loan repayment?
For Federal loans:
Federal Repayment Estimator Access Group Loan Calculator–
Access Group Loan Manager
For Private loans:
Wells Fargo Private Student Loan Calculator

Will I pay less if I consolidate?
Direct Loans Consolidation Calculator
FinAid Comparative Consolidation Calculator

Will I pay less if I refinance?
Citizens Bank Refinancing Calculator-
Student Loan Hero Refinancing Calculator–

How much interest will accrue if I take a deferment?
Nelnet “Cost of Postponing Your Payments” calculator 
Student Loan Hero Deferment Calculator- 

Will I earn enough to make my loan payments?
Paycheck City-Paycheck Calculator
Mapping Your Future Debt/Salary Wizard-
Studentloans.gov Financial Aid Counseling Tool–
iGrad “Will I Be Able to Pay Back  My Student Loans” calculator –

How much in addition to my monthly payment would I need to pay to pay off my loans in “X” years?
Student Loan Hero Prepayment Calculator-
Bankrate Loan Calculator and Amortization–

What would my loan balance be after making “X” number of payments?
DinkyTown Amortizing Loan Calculator –

Should I pay off my student loans or invest?
Student Loan Hero- Payoff VS Invest Calculator–
iGrad Pay Down Debt or Invest Calculator –

Leading the Pack… YLS Loan Counseling

It’s nice to be ahead of curve, lead the pack, whatever euphemism you want to use. It’s also great to receive proof that what you are doing is the right approach.  And that’s what happened to us when TG (a nonprofit promoting education access) in cooperation with the National Association of Financial Aid Administrators released a report last month entitled INFORMED OR OVERWHELMED? A Legislative History of Student Loan Counseling with a Literature Review on the Efficacy of Loan Counseling

What that report validated for YLS was that our approach to loan counseling is on target.  Because the report concluded that in loan counseling “personalized information appears to contribute to a better understanding of information, and face-to-face counseling may be the best way to deliver this personalized information. Both students and financial aid administrators believe that some personalization, preferably face-to-face, is needed for comprehension”.

We began offering personalized loan counseling sessions to our 3Ls three years ago because we recognized that it had become increasingly challenging to navigate the “ever changing” student loan repayment landscape.   We also believed that, as an institution, we had an obligation to insure that our students made the best short term and long term decisions incorporating their loan debt into their larger financial planning.

The bottom line which underscores the need for individualized loan counseling is this… everyone’s total loan debt is different, everyone’s career path is different and, as such, everyone’s loan repayment is different.  (Let’s also add that based on all those factors everyone’s COAP eligibility is also different.)

There is no effective “one size fits all” loan counseling model. Yet so many schools simply default to having their students complete a generic “on line exit interview” required by federal regulations to get their loan repayment information.  We still have our students do the online exit (so that we are in federal compliance) but also take it one step further with our one on one sessions.

The sessions we offer are all about developing a personalized loan repayment plan for you.  In these one hour (or so) meetings we:

  • review your total loan portfolio and current balances,
  • identify who your loan servicer(s) is, their role in your repayment and how to work with them,
  • go over a calendar of when repayment will start and what you need to do to prepare for it
  • evaluate the myriad of repayment plan options offered by the Dept. of Education so that we can compare both monthly repayment costs and overall loan repayment costs (i.e. total principal vs. interest paid) and determine the most viable plan for you’
  • project what your support under our loan repayment assistance program COAP may look like over your ten years of eligibility, even accounting for various scenarios (job changes, marriage, children, etc.) along the way.

But we didn’t really need a report to validate that our personalized approach was the way to go. The proof for us is always our student themselves. We see that many of them walk into these sessions with a lot of trepidations and fear (let’s face it no one wants to really face their loan debt head on). But overwhelming when they finish the meeting they always say things like “that wasn’t as bad as I thought it would be” or “I really can manage this”.   And that’s our goal … to have you walk out feeling confident that you have plan of action to deal with the loan debt in the context of your overall financial planning.

Retirement…Numbers and Dollars…

25; 43,800; 93; 65; $117,000; 10; 75-85%; $263,000; 85; 67

During one of our most recent financial aid conferences, there were a variety of sessions and speakers who spoke on different topics and one session’s topic was the what, when and how about retirement. He stated this quote, “The 65 year old you will thank the 25 year old you”. It is NEVER too early to start to save for retirement, no matter how much is set aside. Now is the perfect time to start thinking about it. Look at what the FUTURE payoff would be 30-40 years from now (seems like forever but think about how fast your time here at Yale Law is moving).

What do you think when you hear “retirement”? Are you thinking it is way too far off in the future (regardless of how many years away)? Are you currently planning for it? If not, why? Or when you hear “retirement”, do you picture yourself lying on a beach and watching the waves? Traveling across the country or maybe the world? Buying a vacation home? Regardless of the cost of these things, your retirement funds must be 75-85% of your current salary (at the time of retirement) to continue the life style you were accustomed to.

Would you like to retire at a young age? What age is young to you? Age is really just a number but if one retires at the expected age of 65 and lives to the age of 85, during that twenty year retirement period, that one person will consume 43,800 meals which at today’s prices (2014) would cost $263,000. That is just for food! The average age people are living to is 93.

There are different types of retirement plans to choose from, Individual Retirement Arrangements (IRA) Roth IRAs, 401(k) plans, 403(b) plans, etc., too many list but if interested in the different types and want more clarification, description and rules on each, please go to: http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1

For those who were born after 1960 and later, 67 is retirement age and this when you can start the application process to receive social security benefits. Benefits can be applied for at an earlier age, but because you are not at “retirement age” a deduction would be calculated to the benefit. Why would you accept a reduced amount after all of the years of hard work you dedicated to your career? If curious, view the information on the Social Security Administration’s website: www.ssa.gov

The average loan debt of a student who graduated from Yale Law in 2014 was $117,000…hopefully with the help of COAP and your salary…the debt would have long been paid off at retirement, but what if, for whatever reason, it was not? This would be an additional debt taken out of your expected monthly retirement funds.

The Standard 10 Year Repayment Plan…you have heard of this term, correct? If not, at repayment time, this is the most aggressive, standard repayment plan all federal direct loans are automatically placed in (different for private loans). The federal loans have many repayment plans to choose from and it would be best to contact your servicer well in-advance of repayment to discuss the ideal plan that best suits your needs and budget.

It is so much information (and lots more that has not been inputted), so where do you start? Well…..this spring, the Financial Aid Office is holding five information sessions that cover loan repayment, COAP, Consolidating & Refinancing and new this spring, a session focused on financial protection strategies (aka “insurance”) for everyday living (cannot be missed). All very informative and if you learn one thing from each session or just one thing from all five sessions combined, then you will be that much more prepared for the future!

February 11th – Loan Repayment Strategies: Pick Your Plan
March 9th – Coping through COAP – Part I
March 11th – COAP in Action – Part II
March 25th – Let’s Make a Deal…Consolidating and Refinancing of Student Loans
April 1st – The Model for Financial Success with John Caserta

Reminders will be sent before each scheduled session…please stay tuned.

T’was 11 Months Before Loan Repayment- Holiday Greetings from Financial Aid

T’was 11 months before repayment
And all through YLS
All the 3Ls were worrying about their loan mess
All the borrowing had been done
All the MPNs signed
And the reality of debt was beginning to shine
When what to their wondering eyes should appear
But a counseling session with financial aid… to make their loans clear
On Standard, on IBR, or on Graduated too
We will discuss what repayment plan makes most sense for you
Would consolidation or refinancing help in your plight?
And does the future of Public Service Loan Forgiveness look at all bright?
With calculators and spreadsheets that will give you hope
We’ll finish off by projecting your COAP
And I hear the 3L exclaim as they leave YLS
“I have a loan repayment plan now and feel a lot less stressed”.

That rhyme (in the spirit of the holidays) was meant to reinforce that the Financial Aid Office is always willing to do individual loan counseling sessions to review your entire loan portfolio, repayment timeframe, servicer contact, repayment plan options and COAP eligibility. Why are these sessions so important (and why do we keep promoting them)? It’s simple … despite the fact that we offer group workshops on loan repayment and COAP… there is no “one size fits all” advice for loan repayment because:

  1. Everyone’s loan debt (how much and why type of loans at what interest rate) is different,
  2. Everyone’s career trajectory and income is different
  3. And as such (because of 1 and 2) … everyone’s COAP eligibility is different.

That’s why an individual session is so valuable… beause we can develop a long term financial plan which meets your own circumstances and life. And if you have significant others in your life (boyfriends/girl friends, fiancees, spouse, parents … whoever) who you want in on this loan repayment conversation, you are welcome to bring them to the session.

So, 3Ls… if you haven’t scheduled a session yet.. the proverbial loan repayment clock is ticking. Contact the financial aid office to get on our schedule for the Spring term when these sessions are in peak demand.

Let’s Make A Deal- Refinancing Your Student Loans

Remember the basic premise of the vintage game show “Let’s Make A Deal” – you win a prize but then are asked if you want to keep what you have or trade it for another unknown prize that may or may not be better than what you originally had. That’s basically the scenario you are faced with when considering refinancing or consolidating your student loans.

Right now you know how much you borrowed on each loan, you know the interest rate on that loan and if you use the handy Department of Education Loan Estimator you can project (depending on what repayment plan you choose) what that means in terms of a monthly payment, as well as total interest and principal paid over the life of the loan. But what happens when you are facing the decision of refinancing or consolidating your student loans?

First a little background… historically the only vehicle to refinance or consolidate has been the federal Direct Consolidation Loan under which all your federal loans are basically bundled (not unlike a cable/internet/wireless phone package) to create one “mega” loan with a new interest rate based on the weighted average interest rate (from all your individual loans) rounded up to the nearest 1/8th of 1%. Since it is a weighted average rate in some cases (if your overall loan portfolio is made up of loans at high interest rates – like the Grad Plus) you may actually end up paying more over the life of the loan then if you kept the loans individual. You also lose the ability to triage your loans and pay down the highest interest loans first if they are now combined. But for some people the idea of managing multiple loans (1 or 2 for every year of Law School) makes a consolidation seem like a manageable benefit. In addition because it’s still a federal loan you still get the advantage of multiple repayment plan options, the ability to switch plans, can still participate in Public Service Loan Forgiveness, and have generous options for medical and economic forbearance.

But evolving on the student loan landscape over the last couple of years have been lending agencies that will refinance your federal student loans. Some of these agencies are traditional “bank” lenders and others are new ventures created just for the refinancing opportunities. Many of these new companies operate somewhat on a crowd sourcing model where company investors and borrowers are connected with one another for mutual benefit. Many offer borrowers the chance to build their own community for their personal and professional advancement through social and networking events. It’s a new and very different way of looking at student loan repayment and very well may be the wave of the future.

the balance

In refinancing the borrower upfront likely makes two critical decisions: 1) which loan term (i.e. 3 of years to repay the loans) and 2) the choice between a variable and fixed rate. These two decisions are actually interconnected in that the combination of choices drives the ultimate loan payoff amount. A fixed rate (more than likely higher than a variable) partnered with a long repayment term (say 15 years) is always going to yield a more expensive loan repayment than the variable rate at a short repayment (say 5 years). But what if you have a fixed rate on a short repayment vs. a variable rate on a long repayment- that combination may be much harder to analyze. Also with private refinancing your interest rate (whether fixed or variable) is going to be based on your credit (good credit = low rate and not so good credit = higher rate). So depending on what your interest rate turns out to be also drives which combination of the choices will be most advantageous to you.

Weighing the overall value of the fixed vs variable rate is also challenging. The fixed rate will be higher but will be stable throughout the life of loan making long term projections of repayment far more accurate. The variable rate may provide a financial gain over the life of the loan but given that the rate will change makes projections far more “guestimates”

The only way to really assess what to do with your loan among the choices of: 1) keep as is, 2) consolidate or 3) refinance is to try to do a side by side comparison of the following factors: your monthly payments, years in repayment, your total cumulative payments and your total interest paid over the life of the loan. Talk to present loan servicer, talk to the Department of Education’s Loan Consolidation Information Center and your potential private refinancing lender and make sure you understand fully the terms of each decision.

Finally… let’s talk about the elephant in the loan repayment room… COAP. Beginning in the January 2015 COAP cycle, federal loans refinanced through private lenders (that meet our definition of a “private refinanced student loan”) will be allowed into COAP. And while that sounds like a great development (i.e. if you get a significantly lower interest rate in refinancing you will pay less in your loan repayment) remember that that also means that we recalculate your COAP eligible loan balance at that new lower interest rate for a new (presumably lower) annual payout. . That lower annual payout minus your participant contribution based on income will equal a decreased annual COAP award. More significantly it may mean that you will reach the “income out” threshold (that point where the annual payout equals your assessed participant contribution) at a lower income level.

Lots of options, variables need to be analyzed and evaluating in this refinance/consolidate or not decision. Welcome to Let’s Make A Deal.

Want more information on federal consolidation and/or private refinancing of your student loans. See our FAQ on this topic, review the COAP Policy and Procedure Manual and join us for a webinar “ Frequently Asked Questions –Federal Loan Consolidation and Refinancing (and COAP!” ) on Friday, October 17th from 12:00-1:00 PM EDT (registration info) .

A Belated Federal Update, or, What I Should Have Been Writing About… But Didn’t

Ouch! Has it really been 6 months since I last wrote a blog post. Well just because I was inactive doesn’t mean that the great student loan debate didn’t rage on. Congress and the administration seemed to be in a particular frenzy these past few months in trying to come up with solutions to the “student loan crisis”. Much of the fury has been the result of the pending reauthorization of the Higher Education Affordability Act (up for renewal in 2014) and some of the proposal may really just be “marker bills” with more of an intention to “promote” the idea than to actually see any immediate action taken on it. So although nothing has been approved or adopted (yet) and some have already died… here is a sampling of some of the scenarios that are at least making the rounds on the Hill which could (significantly) impact your loan repayment future:

  • ExCEL Act (Earnings Contingent Education Loans Act) – originally proposed by Rep. Petri (R-WI) in the 112th and 113th Congress (and co-sponsored by Rep. Polis (D-CO)) – this bill creates a single student loan program (no more Unsub vs Grad Plus vs. Perkins) that is repaid on an income contingent basis (15% of income above 150% poverty) and would use employer withholdings to make payments. In addition interest would stop accruing on the loan when the total amount of interest accrued (paid and unpaid) equals 50% of the loan’s balance when it entered repayment.
  • Dynamic Student Loan Repayment Act – introduced by Senator Rubio (R-FL) and Senator Warner (D-VA) would replace current loans, subsidies, deferments, forbearances, and repayment options with a single loan called the Income Dependent Education Assistance (IDEA) Loan, and would be repaid through income-based repayment and employer withholding.
  • Financial Aid Simplication and Transparency (FAST ) Act – proposed by Senator Alexander (R-TN) and Senator Bennet (D-CO) – streamlines student loan repayments into two options- 10 year repayment or income-based repayment (eliminating the present Graduate Repayment and Extended (25 year) repayment options ). Also established a one loan (for undergrad and graduates) program.
  • Investing In Student Success Act – introduced by Rep. Petri (R-WI) and Sen Rubio (R-FL) establishes a regulatory framework for income share agreements. (What do income share agreements have to do with student loans you ask? It applies to those cases when individuals/organizations provide students with funds for their education in exchange for the student agreeing to make payments linked to their income after graduation) .

The other hot Beltway topic continues to be the future of Public Service Loan Forgiveness (PSLF). The President’s 2015 Budget Proposal called for capping the (currently uncapped) total amount of loan forgiveness under PSLF to $57,500. (Why $57,500? Because that’s the current aggregrate, undergraduate loan limit. ). The proposal would also limit qualifying payments for PSLF to only income drive repayment plans . More significantly it would calculate married borrower payments for income drive repayment (and therefore PSLF eligbility) on combined household Adjusted Gross Income. This would close a gap in the current regulation which allows a borrower if married to complete their taxes as “married filing separately” using only their AGI to calculate the income drive loan repayment amount. (A huge benefit if the borrower is working for relatively low income (i.e. public service) while the spouse may be making a significantly higher income). The Republicans countered with the GOP Tax Reform Act of 2014 under which the loan debt forgiven in year ten of Public Service Loan Forgiveness would now become a “taxable event”- i.e. you would need to declare the monetrary“value” of the amount forgiven as income on your tax return (and be taxed on income that technically you never received but had “in theory”). Keep in mind as well that we have yet to see the first group of borrowers step forward for their actual forgiveness (that won’t happen until 2017.

Want another example of how really far the politicizing of student loan debt has gone… Check out this recent ad from the College Republican National Committee parodying one of my favorite television shows- “Shark Tank” (Posted here only as example of the level to which this issue is now political fodder not for any political affiliation or endorsement ) But it does get you thinking .. with seemingly every one in Washington throwing out ideas on how to solve the student loan crisis… maybe it is time to turn to the “Sharks” to get this done.

“It’s A Beautiful Thing”- the New Loan Repayment Estimator

Yes I was a skeptic when I heard several months ago that the Department Of Education’s Office of Federal Student Aid was coming out with a new federal student loan repayment calculator to assist borrowers in estimating their repayment. Previous iterations of their calculators had been cumbersome (you had to individually enter all your loans by type and then by interest rate), manual (you had to subtotal all your estimated loan payments by each of the various federal repayment plans) and duplicative (separate calculators for Income Based repayment and Pay as You Earn projections).

But my immediate reaction to the new calculator (now called the “Repayment Estimator”) was simply that it was truly a “beautiful thing” (seriously I think I started to tear up a little also) . Because this time Federal Student Aid go it right. The Repayment Estimator is a huge tool in helping not just to educate borrowers on loan repayment but also in assisting them with making the right choices for them. And here is why it is indeed “so beautiful” :

1) It’s personalized… you log into the Estimator using your personal information and most importantly your FSA (or FAFSA) pin and when you do your loan balances automatically are pulled from the National Student Loan Database system right into the calculator. And it pulls the balances with the in school interest that has accrued to date so you are really getting the most accurate representation of your loan portfolio. No more manually entering each of your loans – POOF .. they are there like magic.

2) It literally tells you everything you ever wanted (or maybe didn’t want) to know about your loans– want your total debt, your weighted average interest rate, who your servicer is, what repayment plans each loan is eligible for… its all there for you!

3) It allows you to consider all your repayment option at once– Standard 10 year, Extended 25 year, Graduated Repayment, Income Based Repayment and Pay As You Earn are all projected automatically and visible simultaneously so that you can easily compare the cost of each option against one another. The Estimator even projects little “extras” like the payment increases (“step ups) that will happen as part of the Graduate Repayment Option and the loan balance that would be forgiven after 20 years of payment under Pay As You Earn or 25 years under Income Based Repayment.

4) There is a lovely parting gift… at the end of the Estimator you have the option to email the calculators results to yourself. This summary will include a detailed spreadsheet of the repayment plan results you saw on the calculator but also has some great comparative graphs documenting projected total amount paid and total interest paid over each plan.

Bottom line… the Repayment Estimator takes the ever complex world of federal student loan repayment and actually makes it (dare I say it?) understandable and clear. It’s a powerful resource for anyone in the quest to become a savvy and empowered loan borrower. Check out the new Student Loan Repayment Estimator today.