Budgeting - Montgomery Township School District



Budgeting HYPERLINK "" \l "collection-play&id=e79dc0ad-3254-4d52-be0f-13f5ab5f9780&subject=featured&lessonId=1" \h 6.6 Manage My Educational InvestmentsActivityNameMy Student Loan Repayment OptionsAs you complete a post-graduation budget, it’s likely that you’ll need to factor student loan payments into your mandatory costs each month. The size of your payments will depend on how much student debt you have taken out and which repayment plan you arrange with your lender. Read the articles attached to the end of this worksheet BEFORE completing this worksheet!1) Estimate Your Student DebtIf you already have your personalized cost of attendance for college, you can use that to estimate your likely student debt at the end of college. Some things you should probably keep in mind: Colleges often raise tuition, room and board, etc. during your period of enrollment, and scholarships and grants may not cover those increases, which would leave you or loans responsible for the difference.Scholarships often have terms that must be met annually (ex: a minimum GPA, continued participation on a sports team, etc). If you lose the scholarship, your student loan debt will likely increase substantially. Some grants need to be re-applied for annually, and missing the due dates could jeopardize your eligibility. If you don’t know your personalized cost of attendance yet, you can use The Project on Student Debt’s - HYPERLINK "" map to determine how much student debt you’re likely to have upon graduation. Follow these directions:Choose the state in which you plan to attend college (not your home state). Click on the state and then look for your specific college in the list of public or private schools. If average student loan debt (as of 2012) is provided for your college, use that figure.If your specific college is not listed, use the state average for student loan debt. Answer the following questions:Are you using a personalized cost of attendance or an estimate from The Project on Student Debt?What college and/or state are you using?What will be your likely student debt at the end of four years? 2) Assess Your Repayment Plan OptionsCurrently, there are 7 basic repayment plans for federal loans. Remember, these will not include any private loans you’ve taken out through a credit union or bank. Private loans are typically riskier for financing student debt, so it’s usually best to rely only on federal loans, if possible. Read descriptions of the 7 plans on the Federal Student Aid - website, paying close attention to the column labeled “Monthly Payment and Time Frame.” Now, follow the directions below, using the Repayment Estimator - and the current standard Direct Loan interest rate of 4.66%, to estimate your monthly student loan payments under each plan. Click the box labeled “Proceed” to use the estimator without logging in.Click “Add Loans” and choose “Direct Unsubsidized” as Loan Type.Add your answer to C above as “Balance.”Use 4.66% as the “Interest Rate” and click the “Add” box.Select your filing status.Enter your annual income from the Salary-Based Budgeting activity as the “Adjusted Gross Income.”Choose the state you plan to live in post-graduation.Click “Calculate Results.” Complete the chart below for your projected loan repayment options.Loan Repayment Plan# of PaymentsInitial (or Constant) Monthly Loan PaymentFinal Monthly Loan Payment (if Increasing)Total Amount of InterestTotal Cost of LoanStandardGraduatedExtended FixedExtended GraduatedIncome-BasedPay As You EarnIncome-Contingent3) Choose Your Repayment PlanAnswer the following questions based on the work you’ve done above, your Income-Based Budgeting activity, and your knowledge of personal finance topics:Which plan offers the lowest overall cost for your student loan?In what ways could you lower that low-cost option (from question D) even more?Which plan will you choose to incorporate into your monthly budget? What are some of the pros of the plan you’ve chosen?What are some of the cons of the plan you’ve chosen, or what will you need to be cautious of as you pay back your loan? Are there any other loan options that you’ve learned about in the course of this Manage Your Educational Investments lesson (consolidation, deferment, forbearance) that you will qualify for or consider using? If so, what are they? How will these options be useful to you? Are there any downsides of using these options? 4) Revise Your Salary-Based BudgetGo back to your Salary-Based Budget project from Lesson 6.1 Budgeting Basics and revise the category for Student Loan based on your budgeting knowledge and work within this activity. Remember, your ultimate goal is to end your complete budget with a surplus, and you’ve still got one budget lesson to complete. 6 Little-Known Facts About Student Loan Grace Periods?By?Betsy MayotteMay 28, 2014 10:00 AMOne of the most common misconceptions in the world of?student loan?repayment may be that repayment does not have to start until six months after graduation.Federal?student loans have a grace period, but that period of time often doesn't work the way consumers think. There are six things you may not know about your student loan grace period.1. The government is looking out for you -- seriously.?Most federal loans come with a grace period that's at least six months long, and the government didn't put that in place to make you freak out about how much money you owe them.Rather, grace periods are a tool meant to help student loan borrowers start off on the right foot. Their intent is to give borrowers some time to find a job and get themselves financially established before their student loan payments come due.[Get the?facts about struggling student loan borrowers.]2. Your grace period isn't necessarily a one-time deal.?Each federal Stafford and Perkins loan gets one grace period per loan. The grace period kicks in anytime the student borrower drops below half-time status in school. The definition of half-time can vary between schools, so check your school's handbook for further information.However, grace periods are an all-or-nothing concept. For?Stafford loans, if students return to at least a half-time status within 180 days, their grace period remains intact, as if it were never used. The next time they drop below half-time status, they again receive the full six months.If a student doesn't return to school until day 181, however, that grace period is gone for good. The next time the student drops below half-time status, that loan will go into repayment immediately.Most students don't drop below half-time status until they graduate, hence the misconception that student loans aren't due for payment until students have that diploma or certificate in hand.[Check out these?ways to prepare for student loan repayment.]3. Different loans have different grace periods.?Federal Stafford loans receive a six-month period. A?Perkins loan?goes for nine months and are allowed another, six-month grace period after most periods of deferment.Graduate PLUS loan?borrowers get something similar to a grace period every time an in-school period ends. Borrowers of?Parent PLUS loans?made on or after July 1, 2008 can ask for the same, but it won't be automatic as it is for other loan types. Federal direct consolidation loans have no such option. Private student loan policies vary, but most do not offer grace periods.Because of all this, it's common for some borrowers -- especially those who have taken a semester off here and there -- to have some loans in grace status while others are due for payment once they graduate.4. The amount you owe may not increase during your grace period:?Some loans accrue interest while they're in a grace period, but others don't. Check out the chart below to see which is which.Loan TypeAccrues Interest During The Grace PeriodFederal subsidized Stafford loans made on or before July 1, 2012NoFederal subsidized Stafford loans made between July 1, 2012 and July 1, 2014YesFederal subsidized Stafford loans made on or after July 1, 2014As of now no, but don't be surprised if that changes in future federal budget related legislationUnsubsidized Stafford loansYesPerkins loansNoGraduate and parent PLUS loansYesPrivate, state and institutional loansLikely yes, but each program varies5. "No payment due" does not mean "Don't make payments."?If you have loans accruing interest during the grace period, this interest will capitalize, meaning it will be added to the principal, when the grace period ends. Any payments made during the grace period, even if they're?interest-only, will lower that amount.[Learn the?five things to know about your student loan report.]If your loan is not accruing interest during this time, you're essentially causing your loan, at least that part of it, to be an interest-free loan. Remember, there's no set amount of interest on student loans. The sooner you pay them, the less interest you'll pay in the long run.6. Your benefits don't stop with your grace period.?If you've already used your grace period but still need a little time after graduation to find a job, you're in luck. Federal student loans have lots of other?repayment options, including postponement for unemployment and lower payment options, to help you manage your loans while you gain your financial footing.If you think you might need some relief, it's important to call your loan holder sooner rather than later. Some options may not be available for loans already past due.FEDERAL STUDENT LOAN PROGRAMS Page 1 of 2 Will you need a loan to attend college? If so, think federal aid first. Federal student loans usually offer borrowers lower interest rates and have more flexible repayment terms and options than private student loans. 1. What is a federal student loan? Federal loans are borrowed funds that you must repay with interest. A federal student loan allows students and their parents to borrow money to help pay for college through loan programs supported by the federal government. They have low interest rates and offer flexible repayment terms, benefits, and options. 2. What is a private student loan? A private student loan is a nonfederal loan issued by a lender such as a bank or credit union. If you’re not sure whether you’re being offered a private loan or a federal loan, check with the financial aid office at your school. 3. Why are federal student loans a better option for paying for college? Federal student loans offer borrowers many benefits not typically found in private loans. These include low fixed interest rates, income-based repayment plans, cancellation for certain employment, and deferment (postponement) options, including deferment of loan payments when a student returns to school. Also, private loans usually require a credit check. For these reasons, students and parents should always exhaust federal student loan options before considering a private loan. See the next page for the types of federal student loans available. 4. How much should I borrow? Borrow only what you need and consider the earnings potential in your chosen profession to determine how easily you can repay your debt. You can find career salary estimates at the U.S. Department of Labor’s Occupational Outlook Handbook at ooh. Your student loan payments should be only a small percentage of your salary after you graduate.What kinds of federal student loans are available?A deferment or forbearance allows you to temporarily postpone making your federal student loan payments or to temporarily reduce the amount you pay.Under certain circumstances, you can receive a?deferment?or?forbearance?that allows you to temporarily postpone or reduce your?federal student loan?payments. Postponing or reducing your payments may help you avoid?default.You’ll need to work with your?loan servicer?to apply for deferment or forbearance; and be sure to keep making payments on your loan until the deferment or forbearance is in place.DefermentWhat is deferment?What happens to my loan during deferment?Am I eligible for a loan deferment?How do I request a deferment?ForbearanceWhat is forbearance?How do I request a forbearance?What happens to the interest on my loan during forbearance?Do I have options besides deferment or forbearance?What is deferment?A deferment is a period during which repayment of the?principal?and interest of your loan is temporarily ?What happens to my loan during deferment?During a deferment, you do not need to make payments.? What’s more, depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment.?The government may pay the interest on yourFederal Perkins Loan,Direct?Subsidized Loan, and/orSubsidized Federal Stafford Loan.The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period, but your payment is not due during the deferment period. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be ?Am I eligible for a loan deferment?The following table provides situations that may make you eligible for a deferment of your federal student loan.Situations When You May Apply for DefermentDeferment Available? (and for how long, if applicable)Direct LoansFFEL loansPerkins LoansDuring a period of at least half-time enrollment in college or career schoolYesYesYesDuring a period of study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled?Yes?Yes?YesDuring a period of unemployment or inability to find full-time employmentYes (for up to 3 years)Yes (for up to 3 years)Yes (for up to 3 years)During a period of economic hardship (includes Peace Corps service)Yes (for up to 3 years)Yes (for up to 3 years)Yes (for up to 3 years)During a period of service qualifying for Perkins Loandischarge/cancellationNoNoYesDuring a period of active duty military service during a war, military operation, or national emergencyYesYesYesDuring the 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier, ifyou are a member of the National Guard or other reserve component of the U.S. armed forces andyou were called or ordered to active duty while enrolled at least half-time at an eligible school or within six months of having been enrolled at least half-time???Yes???Yes???YesIf you are a?Direct Loan or?FFEL Program?borrower who has a loan that was first disbursed (paid to you or on your behalf) before July 1, 1993, you may be eligible for additional deferments for such situations as teaching in a teacher shortage area, public service, being a working mother, parental leave, or temporary disability. For more information, contact your?loan ?How do I request a deferment?Most deferments are not automatic, and you will likely need to submit a request to your loan servicer, the organization that handles your loan account. If you are enrolled in school at least half-time and you would like to request an in-school deferment, you’ll need to contact your school’s?financial aid office?as well as your loan servicer.Your deferment request should be submitted to the organization to which you make your loan payments.Direct Loans and FFEL Program loans: contact your?loan servicerPerkins Loans: contact the school you were attending when you received the loantop?What is forbearance?If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans). ?There are two types of forbearances:DiscretionaryMandatory?Discretionary ForbearanceFor discretionary forbearances, your?lender?decides whether to grant forbearance or not.You can request a discretionary forbearance for the following reasons:?Financial hardshipIllnessMandatory ForbearanceFor mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.You can request a mandatory forbearance for the following reasons:You are serving in a medical or dental internship or residency program, and you meet specific requirements.The total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (additional conditions apply).You are serving in a?national service position for which you received a national service award.You are performing teaching service that would qualify for?teacher loan forgiveness.You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military ?How do I request a forbearance?Receiving loan forbearance is not automatic. You must apply by making a request to your?loan servicer. In some cases, you must provide documentation to support your ?What happens to the interest on my loan during forbearance?Interest will continue to be charged on all loan types, including subsidized loans.?You can pay the interest during forbearance or allow the interest to accrue (accumulate). If you don’t pay the interest on your loan during forbearance, it may be capitalized (added to your principal balance), and the amount you pay in the future will be ?You MUST continue making payments on your student loan until you have been notified that your request for deferment or forbearance has been granted. If you stop paying and your deferment or forbearance is not approved, you will become?delinquent?and you may default on your loan.Do I have options besides deferment or forbearance?Always contact your loan servicer immediately if you are having trouble making your student loan payment. If you don’t qualify for deferment or forbearance, you may be able to?change your?repayment plan. There may be a repayment plan that offers lower payments than you’re currently making. ................
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