Money Management

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As part of their education, college students should develop basic money management skills in order to graduate on time with a minimum amount of debt. Our office has compiled a list of resources that are useful in learning how to manage money and plan for a successful financial future:

Financial Aid Awareness

Direct Loans has created Financial Aid Awareness Counseling to assist students with necessary information for being a responsible loan borrower. The Financial Aid Awareness Counseling is a tool designed to help students understand their responsibilities as a borrower. While this counseling is not required, it is strongly encouraged that students take advantage of the information provided in this counseling tool.

Creating A Budget

There are many useful resources designed to help students create a budget while in school and after graduation. Listed below are a few options to assist with creating a personal budget.

Debt Management

It is important for students to understand how to manage their loan debt as a student loan borrower while attending college and well after they have obtained a degree. The following links provide important information used for student loan debt management.

Responsible Borrowing

Students can view this informative video created by the Department of Education regarding responsible borrowing:

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Loan Repayment

It is important for students to understand their responsibility to repay their student loans well before their first payment is due. Part of that responsibility entails familiarizing themselves with how their grace period functions, who services their student loans, and the types of repayment options available.

While students are not required to begin making payments on their student loans while they are still enrolled, they should be aware of their grace period and how it functions. A grace period is a short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. Depending on the type of loan, students will have a grace period of six months (Direct Loans) or nine months (Perkins Loans) before they must start making payments on their student loans. PLUS Loans do not have a grace period.

A loan servicer is a company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a lender. If students are not sure what company holds their federal student loans and/or need their contact information, they should visit the National Student Loan Database System.

The chart below from StudentAid.gov outlines each type of repayment option, including monthly payments and time frame for repayment. It is important to note that students can change their repayment plan with their loan servicer at any time.

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Quick Comparison
Standard Repayment	Direct Subsidized and Unsubsidized Subsidized and Unsubsidized Federal Stafford Loans All PLUS Loans	Payments are a fixed amount of at least $50/month. Up to 10 years	You'll pay less interest for your loan over time under this plan than you would under other plans.
Graduated Repayment	Direct Subsidized and Unsubsidized 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	You'll pay more for your loan over time than under the 10-year standard plan.
Extended Repayment	Direct Subsidized and Unsubsidized Subsidized and Unsubsidized Federal Stafford Loans All PLUS Loans	Payments may be fixed or graduated. Up to 25 years	Your monthly payments would be lower than the 10-year standard plan. If you are a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans. If you are an FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans. For example: if you have $35,000 in outstanding FFEL Program loans and $10,000 in Direct Loans, you can use the Extended Repayment Plan for your FFEL Program loans, but not for your Direct Loans. For both programs, you must also be a "new borrower" as of October 7,1998. You will pay more for your loan over time than you would under the 10-year Standard Plan.
Income Based Repayment (IBR)	Direct Subsidized and Unsubsidized Subsidized and Unsubsidized Federal Stafford Loans All PLUS Loans made to students Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS Loans made to parents	Your maximum monthly payments will be 15% of your discretionary income (the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence (other conditions apply). Your payments change as your income changes. Up to 25 years	You must have a partial financial hardship. Your monthly payments will be lower than payments under the 10-year Standard Plan. You'll pay more for your loan over time than you would under the 10-year Standard Plan. If you have not repaid your loan in full after 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven.
Pay As You Earn Repayment	Direct Subsidized and Unsubsidized Direct PLUS Loans made to students Direct Consolidation Loans that do not include (Direct or FFEL) PLUS Loans made to parents	Your maximum monthly payments will be 10% of your discretionary income (the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence (other conditions apply). Your payments change as your income changes. Up to 20 years	You must be a new borrower on or after October 1,2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011. You must have a partial financial hardship. Your monthly payments will be lower than the payments under the 10-year Standard Plan. You'll pay more for your loan over time than you would under the 10-year Standard Plan. If you have not repaid your loan in full after you have made the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven. You may have to pay income tax on any amount that is forgiven.
Income-Contingent Repayment	Direct Subsidized and Unsubsidized Direct PLUS Loans made to students Direct Consolidation Loans	Payments are calculated each year and are based on your Adjusted Gross Income, family size and the total amount of your Direct Loans. Your payment changes as your income changes. Up to 25 years	You'll pay more for your loan over time than you would under the 10-year Standard Plan. If you do not repay your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion will be forgiven. You may have to pay income tax on any amount that is forgiven.
Income-Sensitive Repayment	Subsidized and Unsubsidized Federal Stafford Loans FFEL PLUS Loans FFEL Consolidation Loans	Your monthly payment is based on annual income. Your payments change as your income changes. Up to 10 years	You'll pay more for your loan over time than you would under the 10-year Standard Plan. Each lender's formula for determining the monthly payment amount under this plan can vary.

Please note that Perkins Loan repayment is not covered under any of the above mentioned repayment plans. Please contact Student Accounting at (251) 460-6195 or studentaccounting@lzhfilter.com for information about Perkins Loan repayment.

Our office has assembled a chart to help demonstrate the impact responsible borrowing can have on a student's monthly student loan payments:

Loan Amount	Monthly Payment	# of Payments	Total Interest Paid	Total Amount Paid
$1,000	$50.00	22	$76.87	$1,076.87
$1,500	$50.00	34	$179.19	$1,679.19
$2,000	$50.00	47	$333.94	$2,333.94
$2,500	$50.00	62	$555.12	$3,051.12
$3,000	$50.00	77	$843.97	$3,843.97
$3,500	$50.00	95	$1,230.30	$4,730.30
$4,000	$50.00	115	$1,735.12	$5,735.12
$5,000	$66.66	120	$2,279.66	$7,279.66
$7,500	$91.00	120	$3,419.48	$10,919.48
$10,000	$121.33	120	$4,559.31	$14,559.31

To estimate a monthly student loan payments based on borrowing history, please visit the Repayment Estimator at http://studentaid.gov/loan-simulator/.

Missing Payments

There are consequences to missing a student loan payment. A student's account becomes delinquent once they fail to make a payment on time, and late fees may be charged. If the borrower misses several payments, the loan goes into default.

Default
A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 270 days) or otherwise fails to meet the terms and conditions of the loan. If a student defaults on a loan, the university, the holder of the loan, the state government and the federal government can take legal action to recover the money, including garnishing wages and withholding income tax refunds. Defaulting on a government loan will make a student ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect a student's credit rating.

If a student is having trouble making payments, they should contact their loan servicer as soon as possible to discuss the possible options. The two most common arrangements are deferment and forbearance:

Deferment

Occurs when a borrower is allowed to postpone repaying the loan. If a student has a Direct Subsidized loan, the federal government pays the interest charges during the deferment period. If a student has a Direct Unsubsidized loan, the student is responsible for the interest that accrues during the deferment period.

Payments towards interest charges can be postponed by capitalizing the interest, which will increase the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If a student does not qualify for a deferment, they may be able to get a forbearance. A deferment cannot be granted if a loan is in default.

Forbearance
Occurs when a borrower does not qualify for a deferment, but is still experiencing difficulty making student loan payments. Borrowers can opt (for 12 months) to stop making payments on their student loans for a year or reduce their monthly payment to a more manageable amount. Interest will still continue to accrue on loan balances (Subsidized, Unsubsidized and PLUS) if they are placed in forbearance. Students must apply for forbearance and submit any documentation requested by their loan servicer. There are two types of forbearance: Discretionary and Mandatory.

Discretionary Forbearance: With this option, the lender determines if the student loan borrower meets the qualifications for forbearance. Requests for discretionary forbearance can be submitted for the situations listed below:
- Illness
- Financial Hardship

Mandatory Forbearance: With this option, lenders must grant student loan borrowers forbearance if they meet the following criteria (from studentaid.gov). :
- The student is serving in a medical or dental internship or residency program, and you meet specific requirements.
- The total amount owed each month for all the student loans you received is 20 percent or more of the student's total monthly gross income (additional conditions apply).
- The student is serving in a national service position for which they received a national service award.
- The student is performing teaching service that would qualify for teacher loan forgiveness.
- The student qualifies for partial repayment of their loans under the U.S. Department of Defense Student Loan Repayment Program.
- The student is a member of the National Guard and have been activated by a governor, but is not eligible for a military deferment.