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Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012

Student Loans and Debt Management Exit Interview. Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012.

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Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012

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  1. Student Loans and Debt ManagementExit Interview Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2012 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss exact loan balances and repayment options.

  2. 86% of class report having educational debt 59% of class report debt $150,000 or higher Class of 2011 Indebtedness Refer to page 1 Source: FIRST analysis of AAMC 2011 GQ data. Education debt figures include premedical debt. education debt.

  3. “An investment in knowledge always pays the best interest” - Benjamin Franklin

  4. Agenda Know Your Loan Portfolio How to Postpone Payments Repayment Plans Options During Residency Other Considerations

  5. Know Your Loan Portfolio

  6. Refer to page 7 A contract with the lender Has a multi-loan feature • Details Terms and Conditions Rights and Responsibilities MasterPromissoryNote

  7. Rights include the ability to: Rights and Responsibilities Refer to page 7 • 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

  8. Rights and Responsibilities Responsibilities include: Refer to page 7 Make on time loan payments • Make payments despite receipt of bill • Notify the servicer of changes in contact info • Attend an Exit Counseling session • Review your promissory note for all responsibilities

  9. A Serious Obligation Student loans must be repaid Refer to page 7 Manage your debt -don’t let it manage you

  10. Consequences of… Refer to page 8 Delinquency Default

  11. Terms and Conditions Discharge may be available in cases of: Refer to page 9 • Review your promissory note for all terms REFUND ERROR

  12. Finding Your Federal Loans Refer to page 3 • To access, provide: • SSN • Date of Birth • First 2 letters of last name • FAFSA PIN (www.pin.ed.gov) www.nslds.ed.gov

  13. Finding Federal Servicers Refer to page 4 • Contact FSA at: • 1-800-433-7327 • Or email: • fsa.customer.support@ed.gov www.studentaid.ed.gov

  14. Interest Rates Refer to page 12

  15. Repayment Strategy Prioritize repayment efforts – pay the most expensive debt FIRST!

  16. Capitalization Addition of unpaid interest to the principal Refer to page 12 $176,770 $155,000 $21,770 Larger Principal + Interest Principal =

  17. Repayment Strategy Pay the interest on unsubsidized loans PRIOR to capitalization

  18. Loan Repayment Timeline Refer to page 13

  19. How to Postpone Payments

  20. 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.

  21. Postponement Options Refer to page 16 • Forbearance A period when payments are not required Must request from the 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 servicer(s).

  22. Forbearance Refer to page 16 • MandatoryMedical Residency/Internship Use to postpone payments Interest accumulates on sub and unsub loans Request annually from servicer Continuous periods may avoid capitalization* *Check your servicer’s capitalization policy

  23. Repayment Plans

  24. Repayment Plans Refer to page 18 Determines the payment amount & interest cost

  25. 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

  26. Repayment Plans Refer to page 19 • Payments start low, increase over time • Possible higher total cost • Lower initial payments (tied to income) • Possible higher total cost • Likely the lowest monthly payment

  27. Repayment Plans Refer to page 24 Effects of each Repayment Plan on Total Cost

  28. Debt Fact The lower the monthly payment… the higher the interest cost

  29. Repayment Plans Refer to pgs 22-23 Estimated Monthly Payment Amounts

  30. Repayment Strategy To reduce the cost of student loans - make extra payments

  31. Options During Residency

  32. Refer to pgs 24-25 • The most feasible options during residency: Pay Later (using Forbearance) Pay Now (using Income-Based Repayment)

  33. Income-Based Repayment Refer to page 20 • Benefits Partial interest subsidy during the first 3 years Unpaid interest does not capitalize when: • Annual paperwork is filed timely • Borrower demonstrates a PFH Possible loan forgiveness • *As reported to the IRS. Annual verification required of both AGI and family size

  34. Income-Based Repayment Refer to page 20 • To enter IBR, borrower must • Contact each servicer individually to request • Give access to household AGI* (tax records) Inform servicer(s), annually, of family size • Demonstrate a Partial Financial Hardship (PFH) *As reported to the IRS. Annual verification is required of both AGI and family size.

  35. Formula for a Partial Financial Hardship (PFH): Standard payment* >IBR payment More likely when income is low and debt is high Max payment in IBR is the Standard amount* 1st post-M.D. year median stipend is $48,700** Income-Based Repayment Refer to page 20 $410 / mo $2,130 / mo* • As originally determined when calculating Partial Financial Hardship based on $185,000 entering repayment ($162000 total education debt plus $23,000 of capitalized interest from 4-years of school and 6-months of grace). • **Preliminary data from AAMC Survey of R/F Stipends and Benefits and AAMC Analysis

  36. Income-Based Repayment Refer to page 20 Online IBR Calculators www.aamc.org/FIRST www.IBRinfo.org www.studentaid.ed.gov Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size

  37. Other Considerations

  38. Loan Forgiveness Refer to page 37 Eligible Loans + Qualifying Payments + Qualifying Work Public Service Loan Forgiveness

  39. 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

  40. Private Loans Refer to page 41 • 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

  41. Federal Loan Consolidation Refer to page 38 • When to consider consolidation: Variable rates are low Multiple servicers to repay To obtain Public Service Loan Forgiveness (DL) To make Perkins or LDS loans eligible for IBR

  42. 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, cancellation 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.

  43. Special Direct Consolidation Refer to page 38 Available January, 2012 thru June 30, 2012 Must have loans owned by Direct Loans Must have loans owned by a FFEL lender Do NOT initiate a consolidation online Federal servicers will contact eligible borrowers studentaid.ed.gov/specialconsolidation

  44. Taxpayer Relief Act of 1997 Refer to page 40 Student loan interest deduction max $2,500 per year Voluntary payments may be eligible Capitalized interest may be included www.irs.gov/publications/p970

  45. Refer to page 27 Check your Credit Report www.annualcreditreport.com

  46. The FIRST Stop… Refer to page 3 Medloans® Organizer and Calculator • www.aamc.org/FIRST

  47. The Next Steps Refer to page 42 www.aamc.org/FIRST Twitter: @FIRST FACEBOOK: FIRST for Medical Education Your residency program Your medical school financial aid office Your loan servicers’ and their websites • www.ombudsman.ed.gov

  48. Questions? FIRST@AAMC.org

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