Adding Student Loans to a Financial Plan
RightCapital enables you to capture every element of a client's financial landscape — including student loans and repayment options.
Add information about a client's student loan debt in the Profile > Net Worth screen. Student loans can be linked through account aggregation or entered manually.
Adding Student Loans Overview
First, to begin modeling efficient payoff strategies, add the student loan to the client's Profile.
To do so, navigate to Profile > Net Worth and select Add Account > Loan.
Loan Types
The Student loan type dropdown menu offers a variety of private and federal student loan options. The loan type will determine eligibility for Public Service Loan Forgiveness (PSLF) and different income-driven repayment plans.
Payment Plans
The payment plan dropdown menu offers four choices for clients repaying student loan debt:
Standard
Income Based Repayment (IBR)
Pay As You Earn (PAYE)
Saving On A Valuable Education (SAVE)
The standard payment reflects the standard repayment plan to pay off loans in 10 years. Meanwhile, IBR, PAYE & SAVE set the monthly student loan payment affordable based on the client's income and family size. RightCapital will calculate payments under income-driven payment plans using the client's projected Modified Adjusted Gross Income (MAGI), which flows from the Profile > Income area. To list the previous year's MAGI used to calculate this year's payment, visit the Gear Icon > Settings > Tax Assumptions > "Specify prior year's MAGI".
The chart below demonstrates how payments are calculated in each income-driven repayment plan (IBR, PAYE, SAVE). To arrive at a client's discretionary income, 150% of the state poverty guideline amount is subtracted from the client's AGI.
Income Driven Repayment Plan | Payment Amount |
|---|---|
SAVE | 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average for borrowers with both. |
PAYE | Generally 10% of discretionary income |
IBR | Generally 10% of discretionary income if you're a new borrower on or after 7/1/2014, but never more than the 10-year Standard repayment plan amount |
The Standard 10-year repayment amount
The standard ten-year payment field is the amount used to repay the student loan within ten years. Entering a value in this field is essential when modeling IBR or PAYE as the current or proposed payment plan.
IBR & PAYE plans will use the standard ten-year payment amount as the maximum annual payment. Therefore, if $0 is listed in the standard ten-year payment field, IBR & PAYE yearly payments will be capped at $0 even if a larger monthly payment is entered.
Payment start
The Payment start year is an essential variable within the student loan card, allowing RightCapital to determine payments for IBR repayment plans. This field also controls the "new borrower status" of the client's loan.
IDR progress (mos)
This value reflects the months of progress accumulated toward Income-Driven Repayment (IDR) loan forgiveness before the specified loan start date.
Accrued interest
Accrued interest is the total interest accrued through that year. This amount would be capitalized and added to the loan balance if the client left the income-driven payment plan.
Early payoff
If an early payoff is selected, enter the calendar year when the client expects to pay off the remaining loan balance. This can be tracked through the Retirement > Cash Flow > Summary > Expenses area in the applicable year.
Analyzing Student Loan Data
Once the financial parameters of the student loan have been completed, select "Save" to enter the loan into the client's Profile > Net Worth. The loan balance and payments can be tracked through the Retirement > Cash Flow > Summary area within the client's plan.
Advisors can also analyze the loan information within the "..." More Menu > Student Loan tab. This area will display the amortization schedule and list options for refinancing, income-driven repayment plans, and Public Service Loan Forgiveness (PSLF) eligibility. Click this link to access the student loan analysis article.
