Know Your Loan Portfolio

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1 Student and Strategies Prepared for the Graduating Class of 2018 Know Your Loan Portfolio Nicole Knight, MBA Sr. Education Debt Management Specialist & Trainer Spring 2018 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2018 and are subject to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options. 4 Free Online Resource (PDF Download) Education Debt Manager (EDM) Class of 2017 Indebtedness Median MD School Debt: $192,000 PUBLIC PRIVATE $180,000 $200,000 aamc.org/first/graduating-edm Source: AAMC 2017 Graduate Questionnaire (GQ) 75% of class report having educational debt 48% report debt of $200,000 or higher 2 6 Agenda Class of 2017 Indebtedness Know Your Loan Portfolio After Graduation University of Alabama SOM Education Debt Strategies Other Considerations Education Debt* (median) $ 175,000 Credit Card Debt* (mean) $7,700 Got Private Loan Debt? Find it at annualcreditreport.com Refer to page 57 Source(s): 2017 LCME I-B data, 71% w/ ed debt, 13% with credit card debt. *2017 Graduate Questionnaire (GQ)

2 Do You Have Other Debt? annualcreditreport.com 8 11 Finding Your Federal Subsidized vs. Unsubsidized nslds.ed.gov To access, provide your FSA ID, including : Username & Password For questions, visit Subsidized Direct Subsidized Perkins * Primary Care for Disadvantaged Students (LDS)* Institutional (some) Consolidation (underlying subsidized loans) Unsubsidized Direct Unsubsidized Direct PLUS Private Institutional (some) Consolidation (underlying unsubsidized loans) * Subsidy and deferment rights are lost in a consolidation loan 9 12 Fixed Interest Rates for the Class of 2018 M M M M PERKINS* 5.0% PERKINS* 5.0% PERKINS* 5.0% PERKINS* 5.0% DIRECT UNSUBSIDIZED 6.21% DIRECT UNSUBSIDIZED 5.84% DIRECT UNSUBSIDIZED 5.31% DIRECT UNSUBSIDIZED 6.0% DIRECT PLUS 7.21% DIRECT PLUS 6.84% DIRECT PLUS 6.31% DIRECT PLUS 7.0% * Perkins, PCL and LDS are disbursed at a fixed rate of 5%. All loans shown have a fixed interest rate

3 Capitalization Know Your Numbers Med Organizer and Calculator A free tool for MD students and graduates Borrowed (principal balance) + Interest = What You Owe (larger principal balance) Capitalization for the Class of 2018 After Graduation $175,000 + $27,300 = $202, Tip When are the First s Due? Exercise Your Right to Prepay When Sending a Voluntary 1) Send as a Separate - Instruct servicer to APPLY NOW - Specify WHERE to apply it (high interest rate loans are the priority) 2) Verify was Applied Accurately Pay the interest before it capitalizes (whenever possible). aamc.org/first/timeline

4 Decision Time: Graduation Graduation: Decision Time Postponement Options Make s Postpone s Medical Forbearance Postpones payments in annual increments Capitalization may occur at end of residency (if increments occur back-to-back throughout residency) An option for medical residents/interns NOTE: Request increments in a timely manner to avoid unnecessary and additional capitalization Postponement Options Medical Forbearance Contact the loan servicer to apply - Request 30-days before needed - Situation after a 4-year residency Forbearance Forbearance Balance After Grace Interest Balance TOTAL $202k + $48k = $0k Deferment Deferment * Based on the median debt borrowed by the Class of 2017 at this medical school Postponement Options Know Your Numbers Med Organizer and Calculator A free tool for MD students and graduates Interest accrues on all loans Interest will capitalize Contact each loan servicer to apply Request 30-days before needed NOTE: For more details, or to request a deferment or forbearance, contact each loan servicer

5 Medical /Internship Forbearance BEST for You, IF Seeking to REDUCE stress and financial obligations Desiring to INCREASE disposable income Is it a Good Option? NOT for You, IF Seeking Public Service Loan ess (PSLF) Seeking an Driven (IDR) plan forgiveness s are based on household income s (AGI) and family size - recalculated annually. $730/mo $470/mo $310/mo 20% 15% 10% Driven Contingent (ICR) Based (IBR)* Pay (PAYE) Have PRIVATE loans with higher interest rates Want to begin repayment immediately $310/mo 10% Based on the median debt from the Class of 2018 at this medical school, a PGY1 stipend of $55,700 and a family size of one. * New Borrowers on or after July 1, 2014 that select IBR will receive payment amounts equal to that of PAYE s - Terms Driven s $730/mo $470/mo years years Contingent (ICR) Based (IBR)* $310/mo 20 years Pay (PAYE) $310/mo years Based on the median debt from the Class of 2018 at this medical school, a PGY1 stipend of $55,700 and a family size of one. * New Borrowers on or after July 1, 2014 that select IBR will receive payment amounts equal to that of PAYE s Traditional Standard Extended Monthly payments for the entire repayment term are calculated up-front and disclosed to you. 10 Years Years $ /mo $ 1,300/mo Driven (IDR) Based on Previous Year s Household AGI IBR - PAYE - $0 s Maximize ess in PSLF of $0 for 12 Months Self Certify No Significant Change Graduated 10 Years $ 1,000/mo * Based on the median debt from the Class of 2018 at this medical school, a PGY1 stipend of $55,700 and a family size of one. Tax Return of Zero is Accepted Self Certify Zero Taxable Income

6 IDR s Eligibility: New Borrower Defined ICR IBR PAYE Perkins and LDS loans are not eligible unless included in a Direct Consolidation Loan Two Requirements 1) No outstanding loans on October 1, 2007 or paid-off all outstanding loans before receiving a new loan on or after 10/1/07 AND 2) Received a Direct Loan disbursement on/after October 1, IDR s Eligibility: Financial Need ICR Must have a Partial Financial Hardship (PFH) All Borrowers IBR PAYE Show Need Show Need = 10% of Discretionary Income, Changes 50% Yearly of Based interest On not Income covered and Family by payment Size will be subsidized Interest ess Years Capitalizes When You Leave No Cap on Interest Subsidy IDR Eligibility: New Borrowers Only ICR IBR PAYE Show Need Show Need NEW Borrower Are payments even possible during residency? Here s how it is possible IF you budget! Must be a new borrower

7 #2) Do You to Pay? aamc.org/alabama Fundamental Forces of Choices in one area will impact the others MONTHLY COST Each WILL go or depending on the repayment plan Questions? TOTAL COST FORCES TIME 57 Dr. Internal Medicine (General) Student Loan Debt: $175,000 The Best Strategy CASE STUDIES Career: Internal Medicine Length: 3 years Debt: $175,000 Res. Y-1 Salary:$185, How to Know Your Best Strategy Dr. Internal Medicine It s not about the best one It s about what fits with your life and financial goals Earn (PAYE) Based (IBR) 15 * Currently a taxable forgiveness amount. Student Loan Debt: $175,000 $1,500 $1,500 * $369k $0 X $343k $0 $ $318k $0 X

8 Dr. Internal Medicine Dr. ObGyn Earn (PAYE) Based (IBR) 14 * Currently a taxable forgiveness amount. Student Loan Debt: $100,000 $1,300 1,300 $1,500 1,800 $180k $0 X $161k $0 X $1,300 $175k $0 1,300 Earn (PAYE) Based (IBR) 16 * Currently a taxable forgiveness. Student Loan Debt: $175,000 $2,000 $2,000 2,600 $346k $0k* X $317k $0 X $- $334k $ Dr. Internal Medicine Dr. ObGyn Earn (PAYE) 20 Based (IBR) * Currently a taxable forgiveness amount. Student Loan Debt: $350,000 $1,500 $1,500 2,500 $390k $539k* X $535k $457* $2,300 $803k $176* X 3,800 Earn (PAYE) Based (IBR) 15 * Currently a taxable forgiveness. Student Loan Debt: $100,000 $1,300 1,300 $2,000 $189k $0 X $159k $0 X $1,300 $182k $0 1, Dr. ObGyn Dr. ObGyn Student Loan Debt: $175,000 Career: Obstetrics & Gynecology Length: 4 years Debt: $175,000 Res. Y-1 Salary:$230,000 Earn (PAYE) 20 Based (IBR) 23 * Currently a taxable forgiveness amount. Student Loan Debt: $350,000 $2,000 2,800 $2,000 3,200 $472k $457* X $656k $343* $3,000 $869* $0* X 4,

9 The FIRST Stop A tool for graduates!! Public Service Loan ess Pediatrics Med Organizer and Calculator Dr. Peds: Borrowed $175,000, starting salary $145,000 Years Including Pay (PAYE) 10 Revised PAYE 10 $1,200 $1,300 $1,200 $1,300 $117K $117K $203K $191K Public Service Loan ess Pediatrics Dr. Peds: Borrowed $300,000, starting salary $145,000 Other Considerations Years Including Pay (PAYE) 10 $1,200 $1,300 Revised PAYE This amount $1, does NOT change with HIGHER $1,300 debt $117K $117K But this one does higher the debt, higher the forgiveness $452K $401K Public Service Loan ess Loan ess Taxable? Standard PAYE Direct Only s myfedloan.org Employment aamc.org/pslfebook 501(c)3, any level of the government, or a for-profit providing a public service Yes Driven s No Public Service Loan ess

10 Loan ess and Assist. Should You Consolidate? aamc.org/repayasst aamc.org/stloan aamc.org/stloan aamc.org/first/consolidatequiz Consolidation Vs. Refinancing Should I Refinance? federal private Should I consolidate or refinance? aamc.org/first/shouldirefinance Why Consolidate? Taxpayer Relief Act of 1997* Reasons to Consolidate Reduce the Number of Servicers Reduce the # of Make Servicers for PAYE or Make for PSLF Make Make for PSLF for IBR, PAYE, Full Deduction Single $65,000 or less Married filing Jointly $130,000 or less Partial Deduction $65,001 to $79,999 $130,001 to $159,999 NO Deduction $80,000 or more $160,000 or more Max student loan interest deduction: $2,500/year May be eligible: Voluntary payments & capitalization * Student Loan Interest Deduction for 1/

11 Presentation Feedback: aamc.org/alabama Questions? aamc.org/nextsteps 86 Support Along The Way feedback.studentaid.ed.gov aamc.org/advocacy/meded Financial Aid Office & Programs Med Organizer & Calculator saltmoney.org/aamc studentloans.gov 87 An investment in knowledge always pays the best interest 88 11