Balancing Act: Budgeting for Law Students Kris Henderson, Associate Dean for Student Services and Administration David Curtis, Assistant Director, Office of Financial Aid September 12, 2016
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Goals for today s session Review of borrowing basics Review budget basics and learn how to create a budget Discuss the importance of saving and preparing for the unexpected
How To Borrow J. David Curtis Assistant Director, Financial Aid
Things that we will cover today: Cost of Attendance Loan Options Loan Repayment Plans Public Service Loan Forgiveness What you borrow today will impact how you live tomorrow.
Cost of Attendance (COA) Tuition (Billed by UR) $41,500 Other Estimated Costs: Room, board, utilities $11,520 Books and supplies $1,400 Personal expenses $1,530 Direct Loan fees $200 Transportation $1,790 Total COA $57,940 Schools may certify aid up to COA only. Aid, including private loans, may not exceed COA.
Loan Options Federal Direct Unsubsidized Loan Fixed rate of 5.31% for loans disbursed between 07/1/16 and 06/30/17 Interest accrues from date of disbursement Repayment begins 6 months after no longer enrolled at least half time Federal Direct Grad PLUS Loan Credit based loan Fixed rate of 6.34% for loans disbursed between 07/1/16 and 06/30/17 Interest accrues from date of disbursement Can defer payments while in school and up to 6 months after no longer enrolled at least half time
Loan Options (cont.) Private Education Loans Credit Tested Loans Governed by promissory note Interest rate is based on Prime or LIBOR + an add on May be variable or fixed interest rate If variable, may be reset monthly or quarterly, depending on change to Prime or LIBOR Not eligible for Federal Loan Consolidation Not eligible for Public Service Loan Forgiveness Requires School Certification Funds cannot exceed Cost of Attendance (COA) minus any other aid being received
Standard Repayment Plan 10-year repayment plan Minimum of $50 per month; may be more based on loan debt Higher monthly payment The least expensive in terms of interest due to shorter repayment period
Income Contingent Repayment (ICR) Plan (Direct Loan Only) ICR s payment plan is based on borrower s (and spouse s) yearly income, family size, and loan amount After 25 years, any remaining balance is cancelled which is treated as taxable income Payments are based on 12-year repayment schedule multiplied by income percentage factor or 20% of discretionary income Can apply online at www.studentloans.gov.
Income-Based Repayment (IBR) Plan Monthly payment is capped at 15% of discretionary income Maximum repayment is 25 years After 25 years, any remaining balance will be cancelled, with tax liability for cancelled amount Borrower must demonstrate Partial Financial Hardship (PFH) PFH = Standard Repayment amount exceeds calculated IBR repayment amount Can apply online at www.studentloans.gov.
Pay As You Earn (PAYE) Plan Monthly payment is capped at 10% of discretionary income Maximum repayment is 20 years After 20 years, any remaining balance will be cancelled, with tax liability for cancelled amount Borrower must demonstrate Partial Financial Hardship (PFH) PFH = Standard Repayment amount exceeds calculated IBR repayment amount Can apply online at www.studentloans.gov.
PAYE Eligibility Eligibility to PAYE is similar to IBR with the following requirements: Must have no outstanding student loan debt as of Oct. 1, 2007, and Must have a Direct Loan disbursement on or after Oct. 1, 2011
Revised Pay As You Earn (Re-PAYE) Plan Monthly payment is capped at 10% of discretionary income Maximum repayment is 20 years for undergrad loans, 25 for grad loans After 20 or 25 years, any remaining balance will be cancelled, with tax liability for cancelled amount Can apply online at www.studentloans.gov.
Sample Repayment Amounts Assumptions made: AGI: $65,245 (average salary for 2014 Richmond Law graduates) Loan indebtedness: $108,096 (average debt of May 2014 Richmond Law graduates) Single person All interest was paid while in school Lives in continental U.S.
Sample Repayment Amounts Plan # of Payments Monthly Total Forgiveness Standard: 120 $1,242 $149,040 $0 ICR: 143 $891 - $1,283 $161,643 $0 IBR: 210 $595 - $1,242 $200,305 $0 PAYE: 240 $397 - $1,145 $171,454 $78,742 Re-PAYE: 300 $397- $1,496 $252,359 $12,819 These are estimates only. Actual amounts for income driven plans will vary depending on debt amount, AGI, family size, etc., and will be re-calculated annually. Source: https://studentloans.gov/mydirectloan/mobile/repayment/repaymentestimator.action#view-repayment-plans
Public Service Loan Forgiveness (PSLF) Secretary of Education forgives outstanding balance on an eligible Direct Loan if the borrower: Is not in default Makes 120 separate, full monthly payments, within 15 days of due date Makes payments under one or more qualifying repayment plans Is a full-time employee of a public service organization while making required payments AND at time forgiveness is requested AND granted Forgiven loans under PSLF are not income for tax purposes
Important and Helpful Websites www.nslds.ed.gov National Student Loan Data System; students can access info about total federal loan debt and servicer information www.studentaid.ed.gov/repay-loans information about loan repayment plans, calculators, forgiveness, cancellation, etc. www.studentloans.gov can apply online for IBR, PAYE, and ICR and for loan consolidation
Budgeting Basics Kris Henderson Associate Dean for Student Services and Administration
Understanding Your Financial Needs and Goals Identify your goals and write them down. Develop a monthly in-school budget you can afford and follow. COA is a guide and tells you how much you can borrow. It does not necessarily represent YOUR budget. Look for ways to reduce your spending. Save what you can each month for emergencies. Limit the number of credit cards you have and your total available credit. Borrow wisely. Borrow the minimum amount you need to achieve your goals and repay all that you borrow. Keep accurate, well-organized records of your financial activities. Protect your financial reputation. Accessgroup.org
Planning your budget Plan your budget Helpful tip: Open a savings account and deposit scholarship/loan money. Transfer funds each month to checking account based on your budget. Scholarships/loans cover 9 months. Try to save some funds for summer to supplement your stipend or paycheck. Track your expenses can t set it and forget it Avoid spending traps and use of credit cards Review and revise as circumstances change Accessgroup.org
Loan Portfolio 2015/16 Loan 1 Origination Date Loan Name Total Amount Interest Rate Servicer
Latte Effect Assumptions Daily Cost: $5 Lattes in a Week 5 Cost per Week $25 Weeks in a Year 52 Cost per Year $1,300 Total Cost during 3 Years of Law School $3,900 Annual Interest rate: 6.21% Repayment Term: 120 months/10 yrs Increase in Monthly Payment $44 Total Interest Paid: $1,346 Actual Cost of Lattes: $5,246 (Source: Access Group www.accessgroup.org)
Emergencies Happen
Help with Budgeting CashCourse.org Mint.com FeedthePig.com Budgetbytes.com PracticeMoneySkills.com WiseBread.com AccessGroup.org
Remember: Knowledge is Power