Transcript Slide 1

Student Loans
and Debt Management
Exit 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.
Class of 2010 Indebtedness
Refer to page 1
All Schools
Public
Schools
Private
Schools
Mean
$157,944
$148,222
$172,422
Median
$160,000
$150,000
$180,000
86% of class report having educational debt
59% of class report debt $150,000 or higher
©2011 Association of American Medical Colleges. All rights reserved.
“An investment
in knowledge
always pays
the best interest”
- Benjamin Franklin
Agenda
Know Your Loan Portfolio
How to Postpone Payments
Repayment Plans
Options During Residency
Other Considerations
Know Your Loan Portfolio
©2011 Association of American Medical Colleges. All rights reserved.
Refer to page 6
Master Promissory Note
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 and Responsibilities
Refer to page 7
Rights include
the ability to:
Prepay any federal loan
without penalty
Request a shorter
repayment schedule
Change repayment plans
Request a deferment or
forbearance
Review your promissory
note for all rights
©2011 Association of American Medical Colleges. All rights reserved.
Rights and Responsibilities
Refer to page 7
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
Review your promissory
note for all responsibilities
©2011 Association of American Medical Colleges. All rights reserved.
A Serious Obligation
Refer to page 6
Student loans must be repaid
Manage
your debt don’t let it
manage you
©2011 Association of American Medical Colleges. All rights reserved.
Consequences of…
Refer to page 8
©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
Refer to page 4
To access, provide:
- SS#
- Date of Birth
- First 2 letters (last name)
- PIN # (www.pin.ed.gov)
www.nslds.ed.gov
©2011 Association of American Medical Colleges. All rights reserved.
Interest Rates
Refer to page 11
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Strategy
Prioritize repayment efforts –
pay the most expensive
debt FIRST!
Capitalization
Refer to page 11
Addition of unpaid interest to the principal
Principal
+ Interest
©2011 Association of American Medical Colleges. All rights reserved.
=
Larger
Principal
Repayment Strategy
Pay the interest on
unsubsidized loans PRIOR to
capitalization
Loan Repayment Timeline
Refer 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.
Postponement Options
Refer to page 15
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.
©2011 Association of American Medical Colleges. All rights reserved.
Postponement Options
Refer 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 Options
Refer 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
Refer to page 18
$2,100/mo
Determines
the payment
amount
&
interest
cost
$1,300/mo
$1,000/mo
$ 610/mo
$ 390/mo
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Refer to page 18
Equal monthly payments
Higher monthly payments
Lower total cost
Repayment term of 25 years
Low monthly payment
Likely the most expensive option
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Refer to page 19
Payments start low, increase over time
Possible higher costs
Lower initial payments (tied to income)
Possible higher costs
Likely the lowest monthly payment
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Refer to page 24
Effects of each Repayment Plan on Total Cost
©2011 Association of American Medical Colleges. All rights reserved.
Debt Fact
The lower the monthly payment…
the higher the interest cost
Repayment Plans
Refer to page 22
Estimated Monthly Payment Amounts
©2011 Association of American Medical Colleges. All rights reserved.
Options During Residency
©2011 Association of American Medical Colleges. All rights reserved.
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):
$2,100 payment*
/ mo*
Standard
>
$390
/ mo
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).
©2011 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Online IBR
Calculators
www.finaid.org
www.IBRinfo.org
www.aamc.org/FIRST
Determined by
Calculating
15% of income that
exceeds 150% of the
poverty line for a
borrower’s family size
©2011 Association of American Medical Colleges. All rights reserved.
Repayment Strategy
To reduce the cost of
student loans make extra payments
Other Considerations
©2011 Association of American Medical Colleges. All rights reserved.
Loan Forgiveness
Refer to page 37
Eligible Loans
+ Qualifying Payments
+ Qualifying Work
Public Service Loan Forgiveness
©2011 Association of American Medical Colleges. All rights reserved.
Loan Forgiveness
Other programs listed at AAMC website:
www.aamc.org/stloan
NIH Loan Repayment Programs:
www.lrp.nih.gov
NHSC Repayment Program:
www.nhsc.hrsa.gov/loanrepayment
©2011 Association of American Medical Colleges. All rights reserved.
Private Loans
Refer to page 40
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
©2011 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
Refer to page 38
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
©2011 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
Refer to page 38
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.
©2011 Association of American Medical Colleges. All rights reserved.
Taxpayer Relief Act of 1997
Refer to page 39
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
Student loan interest deduction max $2,500 per year
Voluntary payments may be eligible
Capitalized interest may be included
www.irs.gov/publications/p970
©2011 Association of American Medical Colleges. All rights reserved.
Refer to page 29
Check your
Credit Report
www.annualcreditreport.com
©2011 Association of American Medical Colleges. All rights reserved.
The FIRST Stop…
Refer to page 3
®
Medloans Organizer and Calculator
www.aamc.org/FIRST
©2011 Association of American Medical Colleges. All rights reserved.
Support Along the Way
www.aamc.org/FIRST
FIRST for Residents
Mailbox
FACEBOOK: FIRST for Medical Education
Your loan servicers’ and their websites
Your residency program
Your medical school financial aid office
www.ombudsman.ed.gov
©2011 Association of American Medical Colleges. All rights reserved.
Questions?
[email protected]