Thank you to Samantha Benson from the Higher Education Student Assistance Authority for her presentation on what life looks like after graduation in terms of student loans and the costs of graduate school.  The most important thing regarding you or your children’s finances after graduation is to make sure you understand all the details of any loans.  Some loans have a grace period (such as 6 months for Federal Stafford Loans) before any money needs to be paid back.  Consolidation is an option many people take to reduce their monthly payments and interest rate, but it may extend the life of the loan to 30 years and prevent you from over-paying on the loan.  It is strongly recommended to visit StudentAid.Gov with your child to learn about available repayment plans, current loan servicers, and take advantage of their Loan Simulator.

Repayment Options

Repayment options for Federal Direct Loans include:

• Standard
  • 10 years
  • Highest payment, but lowest total amount
  • will be auto enrolled after school if no other choice is selected during Exit Interview
• Graduated
  • 10 years
  • Payments start off low, but increase roughly every 2 years
• Extended
  • About 25 years
  • Payments are lower, but life of the loan is greatly extended, requiring more to be paid back
  • Must have at least $30,000 in student loan debt
• Income-Based
  • 20-25 years of qualified payments, then rest is forgiven
  • 10-15% of discretionary income
• Income Contingent
  • 25 years, then loan is forgiven
  • 20% of discretionary income OR amount if loan was for 12 years, whichever is lesser
  • Payment is calculated each year based your AGI (and spouse’s if married), family size, and amount of loans
• Pay as you Earn
  • 20 years, then loan is forgiven
  • capped at 10% of discretionary income
• Revised Pay as you Earn
  • 25 years, then loan is forgiven
  • Payment is calculated each year based your AGI (and spouse’s if married)
  • Payments may be higher than Standard repayment

Some loans are also available for loan consolidation, which allows you to combine different individual student loans into one loan with one payment.  Consolidation can lower your overall monthly payment and may lower the overall interest rate between the different loans.

Loan Forgiveness

There are also federal and state loan forgiveness programs that will forgive your student loan debt if you meet certain requirements.  One popular federal student loan forgiveness program is the Public Service Loan Forgiveness program where qualified borrowers can have their loan forgiven after 10 years of payments in a qualified repayment plan if they work in a government agency or certain other non-profits.  Please visit https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service for the most up-to-date information about the PSLF program.

HESAA has some forgiveness programs for state loans, including:

• STEAM Loan Redemption Program
• Nursing Faculty Loan Redemption for Teachers
• Primary Care Physician and Dentist Loan Redemption Program

Please visit https://www.hesaa.org/Pages/LoanRedemptionPrograms.aspx for more information on the different loan forgiveness programs through HESAA.

If a loan is forgiven, the remaining balance MUST BE declared as income on your federal taxes for that year!

Graduate School

Funding for graduate school is much more limited than undergraduate and many of the options that were available to undergraduate students (Subsidized Federal Direct Loan, Pell Grants, TAG).  However, you can take out more money per year.  Types of financial and state aid available for graduate students include:

• TEACH Grant – must attend a school that participates and meet other criteria.  Current maximum award is $3,772
• Federal Direct Unsubsidized Loan – Interest rate is currently 7.05% with a 1.059% origination fee.  The current annual loan amount is $20,500.
• Federal Work Study – part time employment
• Education Opportunity Fund (NJ) – Needs-based grant with awards from $200 – $3,050.
• Grad Plus Loan – Current interest rate is 8.05% with 4.228% origination fee

More Information

For more information on repaying Federal Direct/Stafford loans, please visit https://studentaid.ed.gov/sa/repay-loans.  For more information on managing your loans after school and preparing for the job market, please visit https://www.mappingyourfuture.org/planyourcareer/.  For a wide variety of information on repaying student loans, please visit http://www.hesaa.org/Pages/PayOnline.aspx.

You can also view a sample Repayment Plan Summary at https://www.njstatelib.org/wp-content/uploads/2018/05/Repayment-Plan-Summary.pdf.  You can view a recording of the webinar at https://youtu.be/WhrmNOr1MFM.