Presenter’s name Presenter’s title Spring 2011

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


Know Your Loan Portfolio


Master Promissory Note

Refer to page 6

A contract with the lender

Has a multi-loan feature

Rights and Responsibilities

Details Terms and Conditions


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




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


A Serious Obligation

Student loans must be repaid

Manage your debt -don’t let it

manage you

Refer to page 6


DelinquencyDefault

Refer to page 8

Consequences of…


Terms and Conditions

Discharge may be available in cases of:

Review your promissory note for all terms


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

http://www.pin.ed.gov/


Refer to page 11

Interest Rates

Repayment StrategyPrioritize repayment efforts –

pay the most expensive debt FIRST!


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


Loan Repayment TimelineRefer to page 13


How to Postpone Payments


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



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).



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


Repayment Plans


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


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


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


Effects of each Repayment Plan on Total Cost

Repayment PlansRefer to page 24

Debt FactThe lower the monthly payment…

the higher the interest cost


Estimated Monthly Payment Amounts

Repayment PlansRefer to page 22


Options During Residency


The most feasible options during residency:

Pay Later (using Forbearance)

Pay Now (using Income-Based Repayment)


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



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)



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



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


Other Considerations


Eligible Loans

Qualifying Payments

Qualifying Work

Public Service Loan Forgiveness

++

Loan ForgivenessRefer to page 37


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


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


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


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


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


Check your Credit Report

www.annualcreditreport.com

Refer to page 29


The FIRST Stop…

www.aamc.org/FIRST

Medloans® Organizer and Calculator

Refer to page 3


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?

[email protected]

Documents

Presenter’s name Presenter’s title Spring 2011