Money Management for Entering Medical School Students Entrance Interview Texas Tech HSC Fall 2014 Disclaimer: All information and estimates are based on

Money Management for Entering Medical School Students

Entrance Interview

Texas Tech HSCFall 2014

Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of June 2014 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss the terms and conditions of the loans.

Agenda

Know The Details of Your Loans

The Repayment Timeline

Borrowing Strategically

Have a Spending Plan

Understand and Protect Your Credit

“An investment in knowledge always pays

the best interest”

- Benjamin Franklin

- Benjamin Franklin

©2014 Association of American Medical Colleges. All rights reserved.

Class of 2013 Indebtedness

86% of class report having educational debt

Source: AAMC 2013 Graduate Questionnaire (GQ)

63% report debt of $150,000 or higher

$190,000

$168,000

PUBLIC PRIVATE

Median MD School Debt: $175,000

Refer to page 1


“…Students must arrive at the door of the house of medicine with an

enhanced awareness of how they will navigate the rising tide of medical

education debt …”

Refer to page iv

http://coastalresearch.org/2010/07/an-associate-deans-response-to-drowning-in-student-debt/


Know the Details of Your Loans


The FIRST Stop…

www.aamc.org/FIRST

Medloans® Organizer and Calculator

Refer to page 3


Master Promissory Note (MPN)

Refer to page 6

Is a contract with the lender

Can be used for multiple years

Read before signing

Lists your rights & responsibilities


Rights include the ability to:

Prepay without penalty

Request a shorter repayment schedule

Change repayment plan

Request a deferment or forbearance

See the MPN for all rights

Refer to page 6

Rights and Responsibilities


Rights and Responsibilities

Responsibilities include:

Make on time loan payments

Make payments despite receipt of bill

Notify the lender of changes in contact info

Attend an Exit Counseling session

See the MPN for all responsibilities

Refer to page 6


A Serious Obligation

Student loans must be repaid

Manage your debt -don’t let it

manage you

Refer to page 9


Delinquency

Default

Refer to page 7

Consequences of…


Finding Your Federal Loans

To access, provide:

- SSN

- Date of Birth

- First 2 letters of last name

- FAFSA PIN (www.pin.ed.gov)

www.nslds.ed.gov

Refer to page 4


Finding Other Loans

www.annualcreditreport.com

Refer to page 4

To access, provide:

- Name

- Address

- Date of Birth

- SSN


STAFFORD LOAN

During Medical School

PERKINS LOAN*

5.0%

DIRECT PLUS LOAN

7.21%

FIXED

FIXED

* PCL and LDS Loans are also at a fixed 5%

Interest Rates (’14-’15 loans)

6.21%

FIXED

Refer to page 9


Subsidized vs. Unsubsidized

Sub • si • dy [suhb-si-dee] noun -

Financial assistance granted by the government to cover accruing interest while in-school, in grace, or in a qualifying deferment.

Source: www.dictionary.com

Refer to page 8


Subsidized vs. UnsubsidizedRefer to page 8

Perkins*

Primary Care Loans

LDS Loans*

Institutional Loans (some)

Consolidation Loans (underlying subsidized loans)

Unsubsidized Stafford

Direct PLUS

Private Loans

Institutional Loans (some)

Consolidation Loans (underlying unsubsidized loans)

Subsidized Unsubsidized

*subsidy and deferment rights lost during consolidation


Capitalization

Addition of unpaid interest to the principal

Principal + Interest =Larger

Principal

$175,000$201,600

$26,600

Refer to page 10

Debt Management Tip

Pay the interest on unsubsidized loans PRIOR to

capitalization


If dropping below half-time or withdrawing

Contact the Financial Aid Office

Exit Counseling is required

Payments are required (or grace periods

begin)

NOTICE: Repayment BeginsRefer to page 8


NOTICE: Repayment BeginsRefer to page 19

Know the facts about PLUS Loans


The Repayment Timeline


IN-SCHOOL

REPAYMENT

Grace PeriodsRefer to page 19

GRACE

The path for some loans


Grace PeriodsRefer to page 20


Options During Residency

During residency, there are two choices:

Postpone Payments

Make Payments

DefermentForbearance

Refer to page 22


Postponement Options

NOTE: For more details, or to request a deferment or forbearance, contact the loan’s servicer.

Must apply and qualifyInterest is waived on subsidized loans

Must request from servicerInterest accrues on all loans Medical Residency Forbearance available

Deferment

Forbearance

Refer to pgs 22-23


Options During Residency

During residency, there are two choices:

Postpone Payments

Make Payments

Select a Repayment Plan

Refer to pgs 25-30

DefermentForbearance


Repayment Plans

The plan you choose

determines the

monthly payment amount

Refer to pgs 26-30

Based on an original principal balance of $175,000

Based on an original principal balance of $175,000

*

* For new borrowers on or after July 1, 2014, the IBR monthly payment amount will resemble the PAYE monthly payment amount.


Estimated Monthly PaymentsRefer to pgs 32-33


Strategic Borrowing


Alternatives to Debt

Scholarships

Forgiveness

Support

Budgeting

Refer to page 13


Free Money Perkins, PCL, LDS Stafford

PLUS

Private Loans or

Credit Cards

Borrow WiselyRefer to page 14


Borrow Wisely

Private Monthly Payment

Total Interest

Total Cost

10 Years $760 $49,100 $89,100

PLUS Monthly Payment

Total Interest

Total Cost

10 Years $560 $25,400 $65,400

Stafford Monthly Payment

Total Interest

Total Cost

10 Years $530 $21,000 $61,000

Based on borrowing $40,000 (unsubsidized) with interest capitalizing after four years of medical school;based on interest rates of 6.21% (Stafford), 7.21% (Direct Plus), 12% (Private) and a 6-month grace period.

Refer to page 15

Additional

Cost

+$4,400

Additional

Cost

+$28,100


How Will You Borrow?

Do NOT borrow just because you are eligible

Borrow what you need, not what you want

Decline loans that exceed your need

Accepting loans may affect eligibility for other aid

Avoid forfeiting low rate loans for higher rate debt

Refer to page 15

Financial Aid FactIf a shortfall occurs, previously

declined monies may be obtained – see financial aid for assistance


BORROWING CHALLENGE

$5,000 less each year will REDUCE:

Monthly Payment By: $300(+)

The Total Loan Cost By: $36,000(+)

Borrow Wisely

Note: Assumes amount borrowed in Stafford Loans with 6.21% interest with forbearance during a three-year residency

Source: AAMC FIRST Analysis

TIP: Have a budget and borrow less

Refer to page 17





A Spending Plan in 1-2-3

1) Put it in writing

2) Review periodically to identify leaks

3) Make necessary adjustments

“Live like a student while you are a student…”

Refer to page 41



www.aamc.org/FIRST

Refer to page 44


The Basics of BudgetingRefer to page 41

Your Total Income

Your Total Expenses

= Your Discretionary Income


Spending Wants: Leaks

Small amounts add up over time

It may not seem like much in the short term

GOURMET

$5/day, 5 days/week

$100/month, 10 months

$1,000/year =

$4,000


Spending Wants: Leaks

Consider the alternatives

Savings can also add up quickly

AT HOME

$10/month

10 months/year

$100/year

$400

Are Credit Cards Bad?


The Minimum Payment Trap

Source: BankRate.com

$5,000 balance with an 18% interest rate (Making minimum monthly payments)

Refer to page 43


The Minimum Payment Trap

$5,000 balance with an 18% interest rate (Making minimum monthly payments)

Source: BankRate.com

22.75 years to repay in full

$12,000 in total repayment cost

What could possibly be worth paying more than twice its original value?

Refer to page 43


Credit: Understand & Protect


35%

30%

15%

10%10%

Payment history

Amount owed

Length of history

New credit

Type of credit

A FICO Score is Based On…Refer to page 38


How to Improve Your Score

During medical school, be sure to:

Pay bills on time

Pay down debt on lines of credit

Apply for credit sparingly

Refer to page 37


Refer to page 39

Check your Credit Report

www.annualcreditreport.com


Your loan servicers’ and their websites

Your medical school financial aid office

Support Along the Way

Facebook: FIRST for Medical Education

www.aamc.org/FIRST

studentaid.ed.gov

Refer to page 11

Twitter: @AAMCFIRST

Medloans ® Organizer and Calculator

Questions? [email protected]

Follow us on Twitter: @AAMCFIRST Like us on Facebook: Facebook.com/AAMCFIRST

Documents

Money Management for Entering Medical School Students Entrance Interview Texas Tech HSC Fall 2014 Disclaimer: All information and estimates are based on