Student Loans and Debt Management Exit Interview Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012 Disclaimer: All information and

Student Loans and Debt Management

Exit Interview

Cheri MarksCoordinator 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.

©2012 Association of American Medical Colleges. All rights reserved.

86% of class report having educational debt

59% of class report debt $150,000 or higher

Public Schools

Private Schools

All Schools

Mean $150,612 $176,675 $161,290

Median $155,000 $180,000 $162,000

Class of 2011 IndebtednessRefer to page 1

Source: FIRST analysis of AAMC 2011 GQ data. Education debt figures include premedical debt.

education debt.

“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


Master Promissory Note

Refer to page 7

A contract with the lender

Has a multi-loan feature

Details Terms and Conditions

Rights and Responsibilities


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

Refer to page 7




Responsibilities include:

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

Refer to page 7


A Serious Obligation

Student loans must be repaid

Manage your debt -don’t let it

manage you

Refer to page 7


Delinquency

Default

Refer to page 8

Consequences of…


Terms and Conditions

Discharge may be available in cases of:

Review your promissory note for all terms

REFUND ERROR

Refer to page 9


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 3


Finding Federal Servicers

Contact FSA at:

1-800-433-7327

Or email:

[email protected]

www.studentaid.ed.gov

Refer to page 4


Interest RatesRefer to page 12

Repayment Strategy

Prioritize repayment efforts – pay the most expensive

debt FIRST!


Capitalization

Addition of unpaid interest to the principal

Principal + Interest =Larger

Principal

$155,000$176,770

$21,770

Refer to page 12

Repayment Strategy

Pay 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


Postponement OptionsRefer 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).


ForbearanceRefer to page 16

Mandatory Medical 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


Repayment Plans


Repayment Plans

Determines the payment

amount &

interest cost

Refer to page 18


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

tempadmin

Change Low to: Lower


Lower initial payments (tied to income)Possible higher total cost

Repayment Plans

Payments start low, increase over time Possible higher total cost

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 pgs 22-23

Repayment Strategy

To reduce the cost of student loans -

make extra payments


Options During Residency


The most feasible options during residency:

Pay Later (using Forbearance)

Pay Now (using Income-Based Repayment)

Refer to pgs 24-25


Income-Based Repayment

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

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.

Refer to page 20



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**

• 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

$2,130 / mo* $410 / mo

Refer to page 20



Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size

Online IBR Calculators

www.aamc.org/FIRST

www.IBRinfo.org

www.studentaid.ed.gov

Refer to page 20


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 41


Federal Loan Consolidation

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

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, 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.

Refer to page 38


Special Direct Consolidation

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

Refer to page 38

studentaid.ed.gov/specialconsolidation


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 year

Voluntary payments may be eligible

Capitalized interest may be included

Refer to page 40


Check your Credit Report

www.annualcreditreport.com

Refer to page 27


The FIRST Stop…

www.aamc.org/FIRST

Medloans® Organizer and Calculator

Refer to page 3


Your residency program

Your loan servicers’ and their websites

Your medical school financial aid office

The Next Steps

FACEBOOK: FIRST for Medical Education

www.aamc.org/FIRST

www.ombudsman.ed.gov

Twitter: @FIRST

Refer to page 42

Questions?

[email protected]

Documents

Student Loans and Debt Management Exit Interview Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012 Disclaimer: All information and