As a college alumnus, it is crucial to understand your financial obligations for repaying student loans. Learn how to manage your student loans with this informative webinar presented by Rasmussen College Alumni Association.
Chad Major: Okay, great. Let's get started. Thank you, everybody, for joining us today. It's very exciting for us at the Alumni Association. This is our first of what is to be many continuing education webinars that we are going to sponsor. Thank you for all of your input. This particular topic was suggested to us by many of our alumni as we have contacted them from around the country. All of our alumni have voiced a great interest in having a better connection with our Student Economics Group at Rasmussen, and learning more about the options they have in managing their student loans.
Joining us today on this webinar, let me introduce myself. My name is Chad Major. I am the Director of the Rasmussen Alumni Association. We have been putting together the foundation for this over the course of the past year and a half, and we're very excited to be starting these continuing education webinars moving forward. So please continue to look for more information on topics that will be coming in the future.
Joining me today are Sabrina Firmin and Angel Patel, who work in the Student Economics Group for Rasmussen. Angel will be helping us present, and Sabrina is our expert for questions. As we go through the webinar, please do type your questions into the questions chat window on your screen. When we complete the presentation, we will then circle back to the questions and answer all of your questions there at the end. If you have any trouble or technical issues or anything that comes up during the presentation, please feel free to e-mail us at alumni@Rasmussen.edu and we will do our best to take care of those problems.
With that, I'm going to turn it over to Angel. Again, welcome everybody. Let's get started.
Angel Patel: Hi, this is Angel and Sabrina Firmin. Chad? Are you there?
Chad Major: Yes.
Angel Patel: Real quick, my computer turned off, so I'm going to have to restart it.
Chad Major: Okay.
Angel Patel: I'm working on that right now. It going to take about two minutes to start up. I'm sorry.
Chad Major: That's quite all right.
Angel Patel: It happened right as you were talking.
Chad Major: All right. Everyone bear with us for just a minute, and we will get things up and running again. Sorry for the delay, everybody, but people are still logging in, so maybe it's a good delay.
All right. So while we're waiting here, let me just give you guys some information on the Alumni Association. At the end of the presentation, we'll talk in more detail about the Alumni Association, but for those of you who are joining us for the first time, the Rasmussen Alumni Association has been built on a foundation that is not the traditional alumni association structure. Our alumni association is a continuation of the services that you had as a student at Rasmussen and will continue to follow you throughout your career so that we can stay in contact and continue to support you.
Our Alumni Association is free. We will not ask for fees or donations. That's a common thought when people think of alumni, but we are going provide you with those services and the connection to the college throughout your career for free.
When we get to the end, we will talk about some of the benefits and services that are available to you specifically around career development for alumni, connections to our library and resource services, discounts on things such as entertainment, travel, dining, groceries, and many more things through our connection with a group called Savings Connection. We'll also provide a great virtual networking platform and these kinds of webinars with industry experts to talk to you about various topics that relate to your program and to the college as a whole.
So Angel, are you back up and ready to go?
Angel Patel: Getting there, one more minute. It's joining the webinar right now.
Chad Major: Okay. Angel are you back in?
Angel Patel: About two seconds. It says the download is complete. So it should be opening up right now. It's opening.
Chad Major: Okay, great.
Angel Patel: All right, we are connected.
Chad Major: Great, here we go. All right. Angel, it should be back over to you.
Angel Patel: Okay, thanks. All right. Sorry about that, everyone, we had some technical difficulties on our end. But as Chad mentioned, we're here to talk to you about your student loans. We're all aware that student loans can be confusing and overwhelming, anywhere from when you're applying for student loans as well as now, when you're entering repayment.
The purpose of the presentation today is we want to provide you with an understanding of different loan repayment options that are available to you, as well as making sure that you understand the choices you're making today and the impact that they will have on the total cost of your loans in the future, and the resources that are available to you.
One of those resources, I'm not sure if everyone on the call is aware of, is our student loan management team. They are a team of advisors dedicated to helping you, whether you're a former student at Rasmussen or currently enrolled, to choose the right repayment plan that fits your individual situation. If anything happens, your situation changes, you may lose your job, they're also available. They're around. They can let you know what options are available to you.
So the advisors, they'll help you identify repayment options as I mentioned. They'll provide resources for you to find additional information and any forms that you need if you're applying for different programs, as well as answer questions and concerns. They're also available Monday through Thursday, from 8:00 to 8:00, and on Fridays from 8:00 to 3:00, and even on Saturdays from 8:00 to noon. If you have any questions today regarding your loans or your individual situation, you can contact our team anytime between those hours either via phone or e-mail. As well as now, I learned yesterday that if you go on the Rasmussen website, you'll also see a live chat box where you can try to get in touch with one of our student loan management advisors that way as well. So at the end of the presentation we have a slide that gives you all their contact information.
Here we have ways students pay for school. As we all know, there are grants and scholarships, which are obviously the best source of funds because you don't have to pay that back. Then there's cash payment that you use. It's pretty much the portion you're going to be using out-of-pocket.
Then there are the loans: federal state student loans and private loans. The difference between a federal unsubsidized loan and a subsidized loan is pretty much the government is going to pay down your interest on subsidized loans while you're in school or while you're in a deferment, but they do not on unsubsidized loans.
In private loans, they just tend to be more expensive due to the amount of interest that is charged on those loans. So if you need to take out loans, you should always remember to exhaust your eligibility on federal student loans before resorting to private student loans, because number one, they offer better repayment options, they have forgiveness options, and they have lower fixed interest rates.
There are direct loans and federal family education loans. Both loans are backed Stafford federal loans that offer all the perks of the federal loan program: the ability to postpone your payments if you're having financial difficulty; they both offer a lower interest rate as I mentioned in the previous slide; and you have the option here to consolidate your loans. Keep in mind that if you have private loans, you cannot consolidate private loans with federal loans.
I described the difference between a subsidized loan and an unsubsidized loan. Now I want to go over a quick example showing pretty much the difference in the amount you're going to end up spending when you enter a payment on your loans. So here we have Student A and Student B. They both have borrowed $5,000 in federal loans, and they both have gone to school for a total of four years. The only difference being is that Student A has taken out subsidized loans, whereas Student B has taken out unsubsidized loans. When Student A enters into repayment after four years, she's actually going to owe back $5,000. As I mentioned, mainly because while she's in school, the interest that was accruing on her loans, the government was paying down. Whereas when Student B enters into repayment, as you see in the red line, he's going to actually owe $6,300 in the interest repayment, and that's all the interest that accrued the four years he was in school.
Now let's say Student B decides while he's in school to make $20 payments each month for four years. It might not seem like a lot right now, but when he enters into repayment four years later, he's actually going to reduce his overall debt load to about $5,400. So as you see, by paying in school, you're going to reduce the total amount you owe when you enter into repayment.
Chad Major: All right. We're going to pause here just for a minute to remind you if you have questions as we move along here, please do type them into the question chat window.
This slide is a great thing to keep a hold of this information. We will show it again a couple of more times during the presentation. But these are great resources if you have questions about your loan. So the presentation that we are giving today covers the general topic of student loan management. However, our team here at Rasmussen is available for you on our website or at the phone number or e-mail address that is showing here on your screen, to talk more about your personal situation and to personalize the options and what could be available to you. So please do jot this information down as you see it, and then if you have questions, do type them into the chat window. Back to you, Angel.
Angel Patel: All right, thanks. So now I want to go over making sure that you understand your loans and your options that are available to you, that you do what you need to do. We are available, student loan management advisors are available anytime if you have any questions or concerns. Make sure you contact your services as well if you have any questions.
Research the Internet. There are definitely a lot of programs out there and discounts that you can take advantage of. I know some federal loan programs, they offer discounts if you set up automatic payments. So just doing that research you can learn the different advantages you can take to reduce the amount you're going to end up spending on your loans.
Okay. So now I wanted to go over a scenario of the student who is about to enter repayment. I want to go over an example showing four different repayment options: a standard repayment option; a graduated repayment option; extended; and an income-based repayment plan.
So here we have John. He's pretty much finished and he's graduated with a bachelor's degree and is about to enter repayment. He's taken out about $30,000 in federal loans and has landed a job where he's making about $30,000 salary and expects the salary to increase gradually over 10 years to about $60,000. He's single, he's not married, doesn't have any kids.
So here's the standard repayment option. It's obviously the most common repayment plan that's available. It's the quickest and the cheapest in the amount of time you're paying it off. You have ten years to pay it off. If you do not select a plan when you're about to enter repayment, you're going to be automatically taken to a standard repayment plan.
Now let's say John decides he's going to make some adjustments to his budget, and he makes $345 monthly payments for 10 years. He's going to end up spending $41,000 to repay his standard repayment loan, to pay his loans on a standard repayment option. That's about $11,000 in interest . It may look high now, but you'll see how the total amount he's going to spend on his loans changes between the different repayment options.
The next repayment option I'm going to go over is the graduated repayment option. It offers lower monthly payments in the beginning, but they increase every two years. The increase in your payments is going to be based on your outstanding balance on your loans, not your ability to pay. Let's say John says he wants to extend it out 10 years, and he's making about $245 monthly payments for the first two years. He's going to end up spending about $43,000 in repayment for these loans. The same amount of time he would have stayed in a standard repayment option, he's spending $2,000 more for the benefit of having lower monthly payments his first two years. But as you see here, he's actually paying $500 his last two years in repayment on these loans.
So here's the extended repayment plan. Under this plan, you have to have a minimum of $30,000 federal loans debt in order to be eligible. We said John had $30,000 in federal loans, so he's eligible for it. Let's say he extends his payment period out to 20 years. So here you see a difference in his monthly payments. He's going to be paying $116 less than if he had gone into a standard repayment option. But when he finishes paying off his loans after 20 years, he's actually going to end up spending $13,000 more in repayment on interest than if he had stayed in a standard repayment option. You can see that in the example here, that he's going to be spending a total of $55,000 in the extended repayment option for the same amount of loan debt.
The last repayment plan I wanted to go over is the income-based repayment plan. The monthly payments under this plan are calculated based on your family size and your annual income, and it's adjusted annually. This isn't going to be the greatest option for John just because it's going to be the most expensive compared to the rest of the repayment options. Keep in mind that once you've elected to go into an income-based repayment plan, you cannot be removed. After 25 years, whatever remaining balance that you do have on your loans is going to be forgiven, but it's still going to be taxable.
So with the IBR, plan he's going to end up spending about $64,000 in repayment for the benefit of having $170 monthly payments, which will end up increasing as situations in his life change. As his family increases, as his income increases, it's going to increase as well. So as you see in the example here, you're going to see that pretty much the earlier you pay off your loans, the earlier you begin to pay down your loans, the less you're going to end up spending on the total cost of your loans.
As I mentioned in the beginning of the presentation, you should really take advantage of discounts and other opportunities that are available to you. If you have federal loans, one of those opportunities can be the Public Service Loan Forgiveness Program. Only payments made after October of 2007 will count for the loan forgiveness time frame. But you can apply until 2017. Under this program, you're required to stay in a full-time public service career and make about $120 monthly payment under your repayment plan in order to have your loan amount forgiven after 10 years, and that amount will be taxable.
I've listed out a couple of public services here. You should definitely contact your servicer or a student loan management advisor to know whether your job qualifies or whether the career you would like to enter into would qualify. It's also important to know that if you want to take advantage of this program that you need to be in a standard repayment plan or an IBR or an ICR in order to qualify. But if you are in another repayment plan, just make sure that the repayments that you're making toward your loan are equal to or greater than if you were in a standard payment plan.
If you do quality, some of you are going to decide to consolidate your loans to have one single monthly payment. Just keep in mind, like I mentioned earlier, you can't consolidate private and federal loans together. There's no cost to consolidating your loans, but remember again, as I showed in the example, extending the payment period when you're consolidating your loans is going to lead to lower monthly payments, but increasing your repayment term is going to increase the total cost on your loans due to the amount of interest that you're accruing on those loans over that time.
Chad Major: Great. So we'll pause here again for a moment. I realize that this is a lot of information to take in, in a very short amount of time. Just keep in mind that we will (a) be archiving this webinar, and I will send that post out to all of the people who are participating in the webinar so that you can go back again. We'll also have any piece of this information available to send out to you. Then again, our team is here to support you in every way that we can. As you start to come up with, I've seen a few questions in the box so far that we'll answer here towards the end of the presentation, but again, remember that you have total access to the student economics team, and they're wiling to sit with you and hash out all of the different options that would be available to you personally for your situation. I know that this is quite a bit to take in, and as quickly as we're doing it, you may need to revisit and ask more questions later. But just know that we're here to help.
Angel Patel: All right, thanks, Chad. So now I'm going to talk about postponing your payments. Let's say you're having a hard time making payments. You may be experiencing some economic hardship. You may have lost your job, or you decide to go back to school. Or due to disability, you just really can't afford to make your payments, and you're thinking about going into deferment. Before you make that decision, you should contact your servicer or a student loan management advisor to learn any other options that are available to you, anything else that could benefit you and keep you from going into deferment.
As I mentioned earlier, if you go into deferment, if you have subsidized loans, the government is going to pay down the interest while you're in a deferment, but not if you have unsubsidized loans.
So here I just wanted to show a quick example of a borrower who enters repayment or is thinking about going into deferment. Now let's say this borrower has left school with about $10,000 in federal unsubsidized loan debt. As you see here, if he goes into standard repayment option, he's going to make his payments for about 10 years, and he'll spend about $14,000 in repayment. Now let's say he decides, "You know what? I'm going to have to go into deferment and not make any payments for one year." The interest is still going to accrue on his loan. So when he enters back into repayment one year later, he's now going to owe $10,700.
The point I want to make here is you never know what's going to happen one year from now, whether or not you'll be able to afford those payments then. After your loan amount does increase, your monthly payments will increase as well. So one other option he could have is if he entered into repayment, what if he decided, "You know what? I can afford to make at least $40 monthly payments." When he enters back into repayment after making $40 monthly payments for a year, he's going to reduce the total amount he now owes to about $10,200.
So as I mentioned, and I'm going to keep on mentioning it, as early as you can start making payments, or as much payments as you can make, it's always a great idea because it's going to lower the amount that you're going to actually owe when you enter repayment and reduce the total cost of your loan.
The second option for postponing payments is forbearance. It should be considered as a last resort so you don't fall into default. It's pretty much similar to a deferment, except for your interest is going to accrue whether you're in a subsidized loan or an unsubsidized loan, and you're going to owe that same amount back.
We went over the different sources of funding for school. We went over the different loan repayment options and discount programs that are available. Now, what if you decide paying back your loans isn't a priority right now, or you just can't focus on that, and you think about you're probably just going to ignore making these payments. Or you think, "You know what? I'm gong to worry about that six months out from now," or when you get a job. As you see here, I've listed out a couple of things that could happen to you if you do decide to ignore your loans and you go into default.
Your credit can suffer. One thing that a lot of people don't think about is when you enter repayment, or when you just leave school, your goals in life. Like, what do you want five years from now or even ten years from now? You can't afford to have your credit suffer today because you're not paying back your loans, because it's going to impact your future goals and what you want for your family as well. As I mentioned, it's always important to pay down as much as you can. If you're having problems or if you're having any financial difficulty, make sure you try to get in touch with our student loan management advisors. They can give you some great advice and pretty much point you in the right direction and set you up on the right path.
So what can you do to manage your debt? For one, make sure you're borrowing only up to the amount that you need for school, books and tuition. Restrict the use of credit cards. We all know that credit cards have high interest charges, as well as creating a budget. I know most people don't like going in and having to update your own budget every day or every week. One thing I've found that I joined recently is Mint.com. It's a great budgeting tool. You just go on it, sign up. It's free. You can put in all your information, all your account balances, and it tracks everything for you. If you want them to send you e-mails or text messages, it sends you up-to-date text messages whether or not you've gone over your expenses or you've hit your budget for that month. It's a great tool, and I think everyone should join if you have a chance.
Again, if you decide to return to school, make sure you're making payments. I have written out here "on unsubsidized loans," but for your best interests, whether you have subsidized or unsubsidized, you should always make it a habit to start making payments are early as possible, especially so when you do enter into repayment you're not as overwhelmed and you're already used to making those payments.
Again, if you're having trouble making payments, please, please do not ignore your loans. Make sure you contact a student loan management advisor. It's not only about what's going on today. It's about the choices you're making today and how they're going to impact your future. That's really important to remember.
So that is the end of the presentation. I wanted to thank everyone for attending today. Again, sorry for the technical difficultly at the beginning of the presentation. I'm going to hand it over to Sabrina Firmin to answer any questions that came up during the presentation.
Chad Major: Great, thank you so much, Angel, and thank you, everyone, for your questions. There have been several that have come in. Sabrina will be answering your questions, but let me just go over them for the group, so everyone knows what we're answering. The first question we have is: Is a Sallie Mae loan a private loan, and can it be converted into a federal loan?
Sabrina Firmin: Thank you, Chad. Sallie Mae offers private loans, and they used to offer federal student loans. Both loan types are different. The terms and conditions on both loans are different. Private loans are owned by Sallie Mae, but the federal loans are owned by the Department of Education. So in response to your question, no, you cannot convert a private loan into a federal Stafford loan.
Chad Major: Okay, the next question is: If you choose the standard plan, can you pay extra to principal only each month? For example, some people do on their house payment.
Sabrina Firmin: Under any repayment plan, like the standard repayment plan, you can pay more than the minimum monthly payment anytime you choose. The extra money that you send will be added to the principal and there are no penalties. If you can afford to pay off the entire balance, you are welcome to do so. Again, there are no penalties for paying more than the minimum.
Chad Major: Okay. Great, all right. So the next question is: For the unsubsidized loans, can we pay the interest during the months before payments are actually due, and does it bring down the loan payment?
Sabrina Firmin: Yes, I will definitely encourage any active student to pay the interest while in school on the unsubsidized portion of the loan. Even while in repayment, if you are on a deferment, for example, an unemployment deferment or the economic hardship deferment, the interest on the unsubsidized portion of the loan is your responsibility. If you pay the interest, that will definitely impact the debt on your loan. So the answer is yes, you should if you are able to.
Chad Major: Great. The next question is: Is there any way around converting a federal loan and a private loan? Specifically, this person has many credit options with their bank.
Sabrina Firmin: No, you can't convert one program to another because both loans, even loans, for example, private loans are owned by the private sector, like, Sallie Mae. Federal loans are owned by the Department of Education. And like I said before, the terms and conditions are different, so you can't convert one into the other. Also, like Angel explained, when it comes to loan consolidation, you can't consolidate the two either.
Chad Major: Okay, great. The next question: Are healthcare management and/or public administration majors considered public service under the income-based repayment with Public Service Loan Forgiveness plan?
Sabrina Firmin: The Public Loan Forgiveness plan is a really tricky program that we're still trying to get our hands on. I would suggest to the person who asked that question to call in so we can ask a few more questions, because there's a lot more than just who you work for. There are other areas that you have to qualify, that you have to meet in order to be eligible for the Public Loan Forgiveness Program. So if you can call our number today or anytime throughout the week, 855-986-2255, we would like to go over this information with you and ask you a few more questions and make sure you understand what it takes to quality for this program.
Chad Major: Great. The next question is: I have federal loans that I need to repay after completing my bachelor degree in healthcare management, but I want to continue my education and get a master's degree in public administration. Can I get more loans to do this?
Sabrina Firmin: That would be a question you will have to ask your financial aid advisor when you apply for more loans. They are the only ones who can let you know if you are qualified for more federal student loans. You can't predetermine that in advance. You have to actually work with your financial aid advisor at the school that you wish to attend.
Chad Major: Okay. Next question is: Does a forbearance go onto your credit report?
Sabrina Firmin: It does not. Actually, the forbearance is a privilege that any student that has a federal student loan account, it's their privilege, it's their right to request a forbearance or deferment, and it does not impact your credit rating. It will not go on the credit agency report. So the answer is no.
Chad Major: Okay. Great. Then we have one final question here: Can I start making a payment then even when I am still in school? Is it okay to make as little as $50 a month?
Sabrina Firmin: I would encourage anyone who is in school to make a payment if they can. At the end of the day, you are helping yourself. You will decrease your debt, and when you do graduate from school, you will have less to pay. So the answer is yes.
Chad Major: Okay. Great. Let's see, we have one more question that just came in. Who do we make these payments to?
Sabrina Firmin: When you graduate, about two to three weeks before you graduate, you should get an exit packet from your career service department or the financial aid department. In the package, you will have contact information for all of your loans. If you still need more assistance, you can call our department, 855-986-2255, to find out more detailed information on your account. You can also go to the NSLDS website. You can log in with your PIN information to find out who your lenders are. That information will also be provided. It should be in the screen right now, to look up your loan information – www.nslds.gov and our contact number.
Chad Major: Okay. We have another question that just came in. I have a loan through the Dept. of Ed, Great Lakes, as well as a loan through North Dakota. Can I consolidate?
Sabrina Firmin: The question to this person, and I would like you to answer that question for me. Well, actually, this is a rather personal question, so what I'm going to do is just generalize it. If the loans you have with Bank of North Dakota are federal Stafford loans, the answer is yes. If the loans you have with Bank of North Dakota are deal loans, alternative loans, or private loans, the answer is no.
Chad Major: Okay. How can I arrange payment while I'm still in school?
Sabrina Firmin: We will need to determine who your lenders are. If you can call the student loan management department, we can tell you who your lenders are. We can also let you know how you can make your payments online, through the mail, or through your bank. Or you can go on NSLDS and you will be able to find information on your lenders through the NSLDS website.
Chad Major: Great. Are our payments submitted to all three credit bureaus? Is the next question.
Sabrina Firmin: Yes, it is. So for example, if you become delinquent, the information will be sent to all three bureaus.