Knowledge Base: Student Loans
Explore Student Loans in RightCapital
Need additional information for clients with student loans? This article includes facts and information that will help you to understand the nuances of your client's student loan debt. Click the following links for more information about entering student loans into RightCapital or using the student loan planning module.
Federal Student Loans
RightCapital allows user to designate the student loan type in order to evaluate the eligibility for income driven repayment plans, loan forgiveness options. Federal loans will provide the most flexibility for planning opportunities in RightCapital.
Federal student loans are offered by the government, with terms and conditions that are set by law. These loan types include many benefits such as a fixed interest rate, income driven repayment plan options and eligibility for Public Service Loan Forgiveness (PSLF) not typically offered with private loans.
Loan Servicers for Federal Loans
When modeling student loan planning opportunities in RightCapital, specific data is needed to evaluate what strategies are available in the future. These data points include loan type, payment plan, loan origination date and the standard 10 year payment. If this data isn't available on the loan statement, clients can contact the loan servicer to obtain the relevant details.
A loan servicer is a company that is assigned to handle federal student loan debt on the government's behalf. The loan servicer will assist your client with tasks related to their federal student loans. If the client's circumstances change at any time during their repayment period, the loan servicer will be able to help. If the client is unsure of their loan servicer look for the most recent communication from the entity sending bills for the client's loan payments.
Below is a list of Federal loan servicers and their contact information. These contacts can be used to gather additional details needed for an in-depth student loan analysis.
Loan Servicer Contacting Information
Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.
|1-800-621-3115 (TTY: 1-877-825-9923 for the deaf or hard of hearing)|
Private Student Loans
Private loans entered into RightCapital will not be eligible for income driven repayment plan options or eligibility for Public Service Loan Forgiveness (PSLF). Planning opportunities with private loans typically involve consolidation or refinancing options.
Private loans are offered by private organizations such banks, credit unions, and state-based or state-affiliated organizations. These loan types have terms and conditions that are set by the private lender. Private student loans are generally more expensive than federal student loans.
Below is a graph that outlines different types of student loans and categorizes them by federal and private lenders.
Student Loan Repayment Plans
Student Loans can be repaid in a variety of different methods depending on the client's situation. RightCapital allows users to input and propose four of the most common student loan repayment plans. The standard repayment plan will used fixed payments to pay off the loan within 10 years. The three additional income driven repayment plans (IBR, PAYE & REPAYE) are designed to make student loan debt more manageable by reducing the monthly payment amount. Income driven repayment (IDR) plans can be used to lower monthly payments or provide relief when the outstanding federal student loan debt represents a significant portion of the client's annual income.
The different plans may seem similar, but each has distinct pros and cons. Note that if the client didn't choose a repayment plan, the loan servicer will automatically place them on the Standard Repayment Plan. Below are the details for each student loan repayment plan available in RightCapital.
Income-Driven Repayment Calculation
The following table illustrates how income driven student loan payments are generated within RightCapital. The client's discretionary income is calculated by taking the client's previous year's AGI from their 1040/ Taxes and Fees card, and subtracting 150% of the poverty guideline amount based on the client's family size and residence state.
Taxation on Loan Forgiveness
After income driven repayment plans have met their term limit, the remaining balance is forgiven if the loan hasn't been fully paid off.
Any outstanding balance on the client's loan will be forgiven if it hasn't been repaid fully after 20 years (undergraduate) or 25 years (graduate) when using REPAYE. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years when using PAYE. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years when using IBR. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
Public Service Loan Forgiveness (PSLF)
The PSLF Program forgives the remaining balance on client's Direct Loans after they've made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. The amount forgiven will not be included as taxable income within the financial plan. Advisors can use the student loan planning module to identify opportunities for PSLF while illustrating the benefits within a proposed plan.
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For additional assistance regarding student loans in RightCapital please contact Support.