10/19/2016 FINANCIAL BASICS FOR DVM STUDENTS: WHAT DO MOST STUDENTS KNOW ABOUT W O OS S U S OW OU FINANCIAL LITERACY? OVERVIEW

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1 FINANCIAL BASICS FOR DVM STUDENTS: Understanding student loans and how to effectively manage your funds OVERVIEW Understanding Total Loan Costs Student Cost of Attendance and Budget Reducing loan amount borrowed while in school Budgeting your student loan funds Useful Tips & Resources 2 WHAT DO MOST STUDENTS KNOW ABOUT W O OS S U S OW OU FINANCIAL LITERACY? 1

2 UNDERSTANDING TOTAL LOAN COSTS Interest + Capitalization LOAN INTEREST Interest accrues daily on your student loan from the day it's disbursed until the day your loan balance reaches zero A simple interest rate formula is used to calculate daily interest accrual: Interest rate current principal balance number of days in the year = daily interest Federal student loan interest rates Unsubsidized Loan: 5.31% Grad PLUS Loan: 6.31% 5 LOAN INTEREST CONTINUED Interest rate x current principal balance number of days in the year = daily interest Example: You have a $22,552 Grad PLUS loan disbursed this term with a 6.31% interest rate this year. Using the formula, your daily interest accruing on this loan is:.0631 x $22, = $

3 WHAT S THEIMPACT? If continue to borrow at this level $3.90 daily accumulated interest $1,423 in accrued interest each year just on your Grad PLUS loan for this term When you add in your Unsubsidized Loan - total interest accruing each year is approximately $1,967 At graduation, this term s loans will have accrued $7,870 in interest before capitalization REMEMBER: There will be 8 more terms of loans to consider 7 INTEREST CAPITALIZATION The practice of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the size of the loan Interest is then charged on the new balance, which includes both the unpaid principal and the accrued interest Capitalization may occur when a loan: Enters repayment Exits deferment Exits forbearance Exits any status in which interest accrues Repayment plan is changed by the borrower 8 DO YOU HAVE OUTSTANDING LOAN DEBT FROM SCHOOLS ATTENDED PRIOR TO SGU? A. Yes B. No 0% 0% Yes No 3

4 CANADIAN STUDENT LOANS: NATIONAL STUDENT LOANS SERVICE CENTRE (NSLSC) 10 US STUDENT LOANS: NSLDS FEDERAL LOAN SUMMARY 11 NSLDS MYSTUDENTDATA DOWNLOAD Federal student loan summary Information includes type of loan, Servicer details, disbursed amount, outstanding principal and interest 12 4

5 INTEREST CAPITALIZATION AND IT S IMPACT $15,497 new principal -$12,000 original loan $3,497 added to principal! (29% of original loan amount) $42,277 new principal - $32,067 original loan $10,210 added to principal! (32% of original loan amount) 13 WHAT IS THE MEDIAN DEBT LEVEL OF US LOAN BORROWERS IN THE 2016 DVM GRADUATING CLASS? (COMBINATION OF FEDERAL AND PRIVATE LOANS) 25% 25% 25% 25% A. $181,598 B. $262, C. $290,620 D. $335,415 A. B. C. D. 14 BUDGETING YOUR STUDENT LOAN FUNDS 15 5

6 SCHOOL OF VETERINARY MEDICINE BUDGET TERMS 1&2 Estimated Loan Refund = Total Financial Aid Eligibility (COA) Total Billed Expenses Loan Fees + Any payments made to account (i.e. deposit) The information above outlines the estimated Cost of Attendance for the Basic Science terms based on rates. To be used for informational purposes only. 16 BUDGETING YOUR STUDENT LOAN REFUND Determine what you have to spend up front and budget accordingly August Term Refund Example Term 1 Estimated Loan Refund amount = $4,607 Credit card payment for roundtrip airfare = $1,500 Term 1 = 16 weeks $4,607 - $1,500 = $3,107 / 16 = $ / week 17 BUDGETING YOUR STUDENT LOAN REFUND Determine what you have to spend up front and budget accordingly January Term Refund Example Term 2 Estimated Loan Refund amount = $7,021 Credit card payment for roundtrip airfare = $1,500 Term 2 = 16 weeks $7,021 - $1,500 = $5,521 / 16 weeks = $ / week ($ more per week ($2, total) than during Term 1) 18 6

7 REDUCE YOUR STUDENT LOAN DEBT Were you able to live comfortably off of your refund from last term? If yes, borrow less! $ (weekly Term 2) - $ (weekly Term 1) = $ more per week (Term 2) $ * 16 weeks = $2, You can afford to borrow over $2,400 LESS each year! 19 THE REAL COST OF KEEPING $ Additional Weekly Refund Amount for January term $ Approximate weeks per January term 16 Gross Amount saved each January term $2,414 Total Gross Amount Saved over 4 years ($2,414 * 4) $9,656 Interest Saved Year 1 Loans ($2,414 * 6.31%) 31%)* 4 $ Interest Saved Year 2 Loans ($2,414 * 6.31%)* 3 $ Interest Saved Year 3 Loans ($2,414 * 6.31%)* 2 $ Interest Saved Year 4 Loans ($2,414 * 6.31%)* 1 $ Total Interest Saved over 4 years $1, TOTAL AMOUNT SAVED WHILE IN SCHOOL $11, LIVE IN THE MOMENT, PLAN FOR THE FUTURE Review your available funds and work backwards Create a spending plan You don t necessarily have to cut ALL expenses as long as you are spending within your means i.e., You don t want to give up morning coffee, find other areas to cut back on so you remain within budget for the term 21 7

8 FIND EASY, REALISTIC WAYS TO SAVE Food Grocery shop once a week, buy local brands when possible, pre-plan your meals, cook in bulk (i.e. crockpot recipes, etc.) Books/Supplies Bring what you can from home Buy electronic textbooks or used books from upper-termers Rent books you know you won t need again later 22 FIND EASY, REALISTIC WAYS TO SAVE Rent / Housing Share a room / apartment Turn off air conditioning during the day while in class Use wifi for entertainment (streaming), calling home, etc. Transportation Shop EARLY For flights Use the bus system! 23 BUDGETING BASICS: HOW TO SET A BUDGET AND STICK TO IT Find a budgeting system that fits your needs Excel Spreadsheet / Google sheets Mobile App or web-based program (Mint, YNAB, AVMA, etc.) Notebook Build your budget based on what you take home not what you make Be sure to factor all of your expenses into your budget Fixed expenses: Mortgage, rent, etc. Variable expenses: Utility and grocery bills Keep track of your expenses and balance your budget every month to streamline where you can Identify issues early so they can be corrected right away! 24 8

9 MANAGING YOUR FINANCES RESPONSIBLY: HOW TO CREATE A REALISTIC BUDGET Prioritize what s in your budget to see where you can make cuts Cut out what you really don t need in order to start saving money Build rewards into your budget (e.g., eat out every other week) Stay disciplined Try to make budgeting a part of your daily/monthly routine 25 WHAT DO YOU THINK YOUR ANNUAL STARTING SALARY WILL BE ASANEW DVM? 1. $25,000 - $40, $40,001 - $55, $55,001 - $65, $65,001 - $75, $75,001 - $85, $85,001 - $100, >$100,000 17% 17% 17% 17% 17% 17% NEW DVM STARTING SALARIES Source: 2015 AVMA Report on Veterinary Debt and Income 27 9

10 WHAT AREA OF PRACTICE ARE YOU CONSIDERING? 1. Food Animal 2. Equine 3. Mixed Practice 4. Companion Animal 25% 25% 25% 25% 0 of MEAN STARTING DVM STARTING SALARIES Source: 2015 AVMA Report on Veterinary Debt and Income 29 NET INCOME VS. EXPENSES 30 10

11 USEFUL TIPS & RESOURCES 31 BANKING TO YOUR BENEFIT Research all different types of checking / savings accounts Compare benefits know what is available to you Charles Schwab High Yield Investor Checking Account* No minimum account balance or monthly fees No foreign transaction fees or ATM fees Will refund any third-party ATM fees charged Bank of America* ScotiaBank International Partner ATM s Avoid Non-BOA $5 usage fee as well as the ATM operator access fee *For informational purposes only. SGU does not endorse any of these institutions or products 32 UTILIZE FREE RESOURCES Mint Access via internet or mobile app Connects with your bank, investment, and other accounts to track and analyze monthly expenses Get a big picture view of how you are spending your money and create a personalized budget Remind you when bills are due, if you were charged a fee, and if you have exceeded a spending goal Allows you to pay immediately or schedule a bill payment 33 11

12 UTILIZE FREE RESOURCES Pocketguard Access via internet or mobile app (also has an Apple Watch component) Connects directly to your bank accounts so that you always have access to current transactions and balance Analyzes spending to identify recurring payments that you need to plan for and can identify your income so have a good idea of your cash flow Simple charts outline where you spend your money, and a tap shows what you are spending in each category 34 UTILIZE FREE RESOURCES Student Loan Prepayment Calculator Shows impact of making regular extra payments Amount of interest savings and the number of payments saved from the repayment schedule as compared with a regular loan that has no prepayment Debt Payoff Calculator Calculate how to accelerate your debt payoff Where to apply extra payments Save hundreds, even thousands in interest and shave years off of the loan 35 UTILIZE FREE RESOURCES AVMA Personal Finance Tool Available free to all current AVMA members Input and save personal and professional expenses, bills, student loan debt, etc. View personal year to year comparisons Helps set up strategic planning to pay down debts and save for the future Compare your financial situation with other DVM professionals around the country

13 SGU CARENAGE: FINANCIAL AID RESOURCES Tools to allow you to financially plan and manage your student loans and personal finances efficiently and effectively Provides useful information and financial aid resources in the form of PDF s, videos, and recorded webinars that cover a wide range of financial aid topics Topics include Financial Literacy Personal finances Budgeting Money-saving websites Financial Aid Resources: aid/financial aid resources1 37 OLLOW US ON FACEBOOK! SGU Financial Aid deadline reminders and important information Useful tips and tools for personal money management Relevant news articles regarding student loans and overall financial well-being 38 Financial Aid Counselor Contact information and useful website links WHO DO I CONTACT IF I HAVE FINANCIAL QUESTIONS? 39 13