Repayment Strategies for New Podiatrists 2014 APMA Young Physicians Institute

Transcription

1 Repayment Strategies for New Podiatrists 2014 APMA Young Physicians Institute Paul S. Garrard Founder and President, PGPresents, LLC Independent Student Loan Consulting October PGPresents, LLC - All Rights Reserved Questions submitted Student loans, home ownership, and investing Loan forgiveness Private loans as an alternative Consolidation Changes to repayment plans Securing debt help from employers 1

2 Common Sense Approach 1. Know what you borrowed, who has your loans, and current status on them 2. Identify and constantly review your repayment objectives 3. Consider repayment options to meet your repayment objectives and career plans as a podiatrist Podiatrists portfolios Federal Stafford Loans* Subsidized and Unsubsidized No new Subsidized Stafford Loans for GP** students as of July 1, 2012 Federal Grad PLUS Loans* Federal Consolidation Loans* Campus based (Federal Perkins*) Private loans * Referenced at ** Graduate and professional students 2

3 Private loans Variable and fixed rates Often high caps, more frequent capitalization Cosigner may be required, usually results in lower rate and lower fees Less repayment and postponement flexibility, no forgiveness options Less important when in active repayment Repayment objectives Protect income, maximize cash flow More than a few DPM residents, also possibly new podiatrists with high debt and other obligations, including an interest in purchasing home and investing Aggressive repayment Loan forgiveness, help from employer Ask the tax question Simplicity and convenience 3

4 Repayment plans* Standard 10 year (level payments) Graduated 10 year Extended 25 year (level payments) Income-Driven Repayment plans Income Based Repayment (IBR)** Pay As You Earn (PAYE) * Stafford, Grad PLUS, Federal Consolidation ** New version for first time borrowers as of July 1, 2014, similar to PAYE IBR and Pay As You Earn Designed for highly indebted borrowers with low to moderate incomes Ideal for DPM residents and new podiatrists whose debt greatly exceeds income who have no other resources Renew annually and prove eligibility* Stafford, Grad PLUS, Federal Consolidation only** * You must meet a threshold called Partial Financial Hardship ** Consolidation may not include Parent PLUS 4

5 Forgiveness programs Income Based Repayment (IBR) after 25 years* Pay As You Earn (PAYE) after 20 years* Public Service Loan Forgiveness, assuming borrower meets eligibility requirements** * Forgiveness amount taxable under current law ** Forgiveness amount NOT taxable under current law PSLF* Passed into law in 2007 as part of College Cost Reduction and Access Act (CCRAA) Designed to encourage highly indebted borrowers to enter and remain in public service for 10 years Not discipline specific * Public Service Loan Forgiveness 5

6 PSLF eligibility Borrowers must Make 120 timely payments with eligible repayment plan like IBR or PAYE on Eligible loans (Direct Loans) while Working for eligible public service employer (which includes non-profits) Your career path may not be consistent with non-profit sector Consolidation then and now Consolidation in the past Borrowers consolidated when variable rates dropped, locking in low rates Borrowers consolidated when they had multiple Loan Servicers Consolidation now Rates are high and already fixed Many have loans with one Loan Servicer 6

7 Recent changes New interest rate structure* Rate on NEW loans changes each July 1, then remains FIXED for life of loan Stafford Loan cap at 9.5% Grad PLUS cap at 10.5% Expansion of PAYE* Removes October 1, 2007 trigger Current IBR borrowers may be able to move next December 2015 * Executive Order signed in June 2014 expanding Pay As You Earn eligibility Proposed changes Elimination of taxation of forgiveness amount under IBR and PAYE Cap on Public Service Loan Forgiveness at $57,500 7

8 Takeaways 1. Your repayment strategy is your own, and always subject to change 2. Student loans only one piece of your financial picture, but often one of the most expensive 3. Learn from your colleagues, but remember your borrowing environment may be different Thank you! Paul S. Garrard Founder and President, PGPresents, LLC Independent Student Loan Consulting PGPresents, LLC - All Rights Reserved 8