FiCEP Student Loan Counseling 4 — Questions and Answers
Question 1: A borrower on Income-Based Repayment (IBR) has had their annual income increase significantly. What is the required action regarding their payment amount?
- Payments remain fixed until the next recertification date (Correct answer)
- The borrower must immediately contact their servicer to adjust payments
- Payments automatically adjust each month based on tax transcripts
- The borrower must switch to a Standard Repayment Plan
Correct answer: Payments remain fixed until the next recertification date
IBR payments are recertified annually; the new income only affects payments after the next recertification date.
Question 2: Under the Teacher Loan Forgiveness program, which loan types are eligible for forgiveness after five consecutive years of qualifying teaching?
- Direct Loans and FFEL Loans only (Correct answer)
- Direct Loans, FFEL Loans, and Perkins Loans
- Perkins Loans only
- All federal and private student loans
Correct answer: Direct Loans and FFEL Loans only
Teacher Loan Forgiveness applies only to Direct Loans and FFEL Loans, not Perkins Loans.
Question 3: A client is delinquent on their federal student loan for 45 days. What immediate counseling action is most appropriate?
- Advise them to apply for Total and Permanent Disability discharge
- Connect them with their loan servicer to explore deferment or forbearance options (Correct answer)
- Recommend they consolidate into a Direct Consolidation Loan immediately
- Advise them to make a lump-sum payment to bring the loan current
Correct answer: Connect them with their loan servicer to explore deferment or forbearance options
At 45 days delinquent, connecting the borrower with their servicer to explore deferment or forbearance can prevent default.
Question 4: What is the maximum amount of subsidized federal student loans an independent undergraduate student can borrow over their academic career?
- $23,000 (Correct answer)
- $31,000
- $57,500
- $138,500
Correct answer: $23,000
Independent undergraduate students have a lifetime subsidized loan limit of $23,000.
Question 5: Which income-driven repayment plan caps monthly payments at 10% of discretionary income and offers forgiveness after 20 years for new borrowers as of July 1, 2014?
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE) (Correct answer)
- Income-Contingent Repayment (ICR)
- Revised Pay As You Earn (REPAYE)
Correct answer: Pay As You Earn (PAYE)
PAYE caps payments at 10% of discretionary income with 20-year forgiveness for eligible borrowers who first borrowed after October 1, 2007.
Question 6: A borrower's federal loans are in default. Which of the following is NOT a consequence of default?
- Loss of eligibility for additional federal student aid
- Immediate requirement to repay the full balance
- Automatic enrollment in an income-driven repayment plan (Correct answer)
- Potential garnishment of federal tax refunds
Correct answer: Automatic enrollment in an income-driven repayment plan
Defaulted borrowers are not automatically enrolled in IDR; they must rehabilitate or consolidate their loans first to regain IDR eligibility.
Question 7: When counseling a borrower about loan rehabilitation, how many consecutive on-time voluntary payments are required to rehabilitate a defaulted federal student loan?
- 6
- 9 (Correct answer)
- 12
- 24
Correct answer: 9
Loan rehabilitation requires nine consecutive, voluntary, on-time monthly payments within 20 days of the due date.
FiCEP Student Loan Counseling 4
A borrower on Income-Based Repayment (IBR) has had their annual income increase significantly.
What is the required action regarding their payment amount?