presenter’s name presenter’s title spring 2011
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Student Loans and Debt Management Exit Interview. Presenter’s name Presenter’s title Spring 2011. - PowerPoint PPT PresentationTRANSCRIPT
Student Loans and Debt ManagementExit Interview
Presenter’s name Presenter’s title Spring 2011
Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2011 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss exact loan balances and repayment options.
©2011 Association of American Medical Colleges. All rights reserved.
86% of class report having educational debt
59% of class report debt $150,000 or higher
All Schools Public Schools
Private Schools
Mean $157,944 $148,222 $172,422
Median $160,000 $150,000 $180,000
Class of 2010 IndebtednessRefer to page 1
“An investment in knowledge always pays
the best interest”
- Benjamin Franklin
AgendaKnow Your Loan Portfolio
How to Postpone Payments
Repayment Plans
Options During Residency
Other Considerations
©2011 Association of American Medical Colleges. All rights reserved.
Know Your Loan Portfolio
©2011 Association of American Medical Colleges. All rights reserved.
Master Promissory Note
Refer to page 6
A contract with the lender
Has a multi-loan feature
Rights and Responsibilities
Details Terms and Conditions
©2011 Association of American Medical Colleges. All rights reserved.
Rights include the ability to:
Prepay any federal loan without penalty
Request a shorter repayment schedule
Change repayment plans
Request a deferment or forbearanceReview your promissory note for all rights
Refer to page 7
Rights and Responsibilities
©2011 Association of American Medical Colleges. All rights reserved.
Rights and Responsibilities
Responsibilities include:
Make on time loan payments Make payments despite receipt of billNotify the lender of changes in contact infoAttend an Exit Counseling sessionReview your promissory note for all responsibilities
Refer to page 7
©2011 Association of American Medical Colleges. All rights reserved.
A Serious Obligation
Student loans must be repaid
Manage your debt -don’t let it
manage you
Refer to page 6
©2011 Association of American Medical Colleges. All rights reserved.
DelinquencyDefault
Refer to page 8
Consequences of…
©2011 Association of American Medical Colleges. All rights reserved.
Terms and Conditions
Discharge may be available in cases of:
Review your promissory note for all terms
©2011 Association of American Medical Colleges. All rights reserved.
Finding Your Federal Loans
To access, provide:
- SS# - Date of Birth- First 2 letters (last name)- PIN # (www.pin.ed.gov)
www.nslds.ed.gov
Refer to page 4
©2011 Association of American Medical Colleges. All rights reserved.
Refer to page 11
Interest Rates
Repayment StrategyPrioritize repayment efforts –
pay the most expensive debt FIRST!
©2011 Association of American Medical Colleges. All rights reserved.
Capitalization
Addition of unpaid interest to the principal
Principal + Interest = Larger Principal
$160,000$182,670
$22,670
Refer to page 11
Repayment StrategyPay the interest on
unsubsidized loans PRIOR to capitalization
©2011 Association of American Medical Colleges. All rights reserved.
Loan Repayment TimelineRefer to page 13
©2011 Association of American Medical Colleges. All rights reserved.
How to Postpone Payments
©2011 Association of American Medical Colleges. All rights reserved.
Deferment
A period when payments are not required
Must apply and qualify
Interest does not accrue on subsidized loans
Unsubsidized loans continue to accrue interest
NOTE: For more details on forbearance or to request a forbearance, contact your servicer.
Postponement OptionsRefer to page 15
©2011 Association of American Medical Colleges. All rights reserved.
Postponement OptionsRefer to page 16
Forbearance
A period when payments are not required
Must request from the lender/servicer
Interest accrues on sub and unsub loans
Many types (administrative, discretionary, mandatory)
NOTE: For more details on forbearance or to request a forbearance period, contact your lender/servicer(s).
©2011 Association of American Medical Colleges. All rights reserved.
Postponement OptionsRefer to page 16
Mandatory Medical Residency/Internship
Used to postpone payments
Interest accumulates on sub and unsub loans
Requested annually from lender
Continuous periods may avoid capitalization*
*Check your servicer’s capitalization policy
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Plans
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Determines the payment
amount &
interest cost
Refer to page 18
$2,100/mo
$1,300/mo
$1,000/mo
$ 610/mo
$ 390/mo
©2011 Association of American Medical Colleges. All rights reserved.
Equal monthly payments Higher monthly payments Lower total cost
Repayment Plans
Repayment term of 25 years Low monthly payment Likely the most expensive option
Refer to page 18
©2011 Association of American Medical Colleges. All rights reserved.
Lower initial payments (tied to income)Possible higher costs
Repayment Plans
Payments start low, increase over time Possible higher costs
Likely the lowest monthly payment
Refer to page 19
©2011 Association of American Medical Colleges. All rights reserved.
Effects of each Repayment Plan on Total Cost
Repayment PlansRefer to page 24
Debt FactThe lower the monthly payment…
the higher the interest cost
©2011 Association of American Medical Colleges. All rights reserved.
Estimated Monthly Payment Amounts
Repayment PlansRefer to page 22
©2011 Association of American Medical Colleges. All rights reserved.
Options During Residency
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The most feasible options during residency:
Pay Later (using Forbearance)
Pay Now (using Income-Based Repayment)
©2011 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
IBR Repayment Plan
Based on household AGI* and family size
Partial interest subsidy during the first 3 years
Unpaid interest does not capitalize when:• Annual paperwork is filed timely• Borrower demonstrates a PFH
*As reported to the IRS. Annual verification required of both AGI and family size
©2011 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
To obtain IBR, borrower must do the following
Contact each lender individually to request
Inform lenders, annually, of family size
Give lenders permission to access tax returns
Demonstrate a Partial Financial Hardship (PFH)
©2011 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Formula for a Partial Financial Hardship (PFH):
Standard payment* > IBR payment
More likely to occur when income is lower and debt is higher
Max payment in IBR is the Standard amount* 1st post-M.D. year median stipend is $47,700
* As originally determined when calculating Partial Financial Hardship based on $182,000 entering repayment ($160,000 total education debt plus $22,000 of capitalized interest from 4-years of school and 6-months of grace).
$2,100 / mo* $390 / mo
©2011 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size
Online IBR Calculators
www.finaid.orgwww.IBRinfo.org
www.aamc.org/FIRST
Repayment Strategy To reduce the cost of
student loans - make extra payments
©2011 Association of American Medical Colleges. All rights reserved.
Other Considerations
©2011 Association of American Medical Colleges. All rights reserved.
Eligible Loans
Qualifying Payments
Qualifying Work
Public Service Loan Forgiveness
++
Loan ForgivenessRefer to page 37
©2011 Association of American Medical Colleges. All rights reserved.
Other programs listed at AAMC website:
Loan Forgiveness
www.aamc.org/stloan
NIH Loan Repayment Programs:
NHSC Repayment Program:
www.lrp.nih.gov
www.nhsc.hrsa.gov/loanrepayment
©2011 Association of American Medical Colleges. All rights reserved.
Private Loans
Details of Private Loans
Typically unsubsidized for life of loan
A grace period/forbearance may be available
Cannot be included in IBR or PSLF
Be cautious when consolidating private loans
Refer to page 40
©2011 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
When to consider consolidation:
Variable rates are low
Multiple lenders to repay
To obtain Public Service Loan Forgiveness (DL)
To make Perkins or LDS loans eligible for IBR
Refer to page 38
©2011 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
Effects of consolidating
A longer term will increase the interest costs*
Able to prepay or change repayment plan
A new loan with new benefits**
May negatively affect grace, deferment, or forgiveness options
* The rate will be a weighted-average that may be rounded up to the nearest 1/8th
** Forfeiture of original borrower benefits is likely. Future borrower benefits vary by lender.
Refer to page 38
©2011 Association of American Medical Colleges. All rights reserved.
Full Deduction Partial Deduction NO Deduction
Single $60,000 or less $60,001 to $74,999
$75,000 or more
Married filing
Jointly$120,000 or
less$120,001 to
$149,999$150,000 or
more
www.irs.gov/publications/p970
Taxpayer Relief Act of 1997
Student loan interest deduction max $2,500 per yearVoluntary payments may be eligibleCapitalized interest may be included
Refer to page 39
©2011 Association of American Medical Colleges. All rights reserved.
Check your Credit Report
www.annualcreditreport.com
Refer to page 29
©2011 Association of American Medical Colleges. All rights reserved.
The FIRST Stop…
www.aamc.org/FIRST
Medloans® Organizer and Calculator
Refer to page 3
©2011 Association of American Medical Colleges. All rights reserved.
Your residency program
Your loan servicers’ and their websites
FIRST for Residents Mailbox
Your medical school financial aid office
Support Along the Way
FACEBOOK: FIRST for Medical Education
www.aamc.org/FIRST
www.ombudsman.ed.gov
Questions?