Money Management For Entering Medical School Students Entrance Interview Nicole Knight, MBA AAMC Fall, 2015 Students must arrive at the door of the house of medicine with an enhanced awareness of how they will navigate the rising tide of medical education debt Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of July 2015 and are subject to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options. Agenda Education Debt Manager (EDM) Know The Details of Your Loans Understand The Repayment Timeline Borrowing Strategically Have a Spending Plan Protect Your Credit www.aamc.org/first Class of 2014 Indebtedness Finding Your Federal Loans Refer to page 1 Median MD School Debt: $180,000 PUBLIC $170,000000 Source: AAMC 2014 Graduate Questionnaire (GQ) PRIVATE $200,000 84% of class report having educational debt 43% report debt of $200,000 or higher Tufts University SOM Education Debt Source(s): 2014 Graduation Questionnaire and 2014 LCME I-B data *Class of 2014 Non-Education (non-federal loans) as reported on the GQ Survey % with Education Debt Education Debt $240,500 79% Non-Education Debt (avg) $12,897* 1
www.aamc.org/first Can Medical Students Afford to Choose Primary Care? An Economic Analysis of Physician Education Debt Repayment Physician Education Debt and the Cost to Attend Medical School The Details of Your Loans www.aamc.org/first Medloans Organizer and Calculator Refer to page 3 Finding Your Federal Loans Refer to page 4 To access, provide your: FSA ID (username/password) A tool for MD students!! www.aamc.org/first www.nslds.ed.gov During Medical School Refer to pages 10-11 During Medical School Refer to pages 10-11 Interest Rates PERKINS LOAN* DIRECT UNSUBSIDIZED LOAN DIRECT PLUS LOAN Interest Rates ( 16-17+ LOANS PERKINS LOAN* DIRECT UNSUBSIDIZED LOAN DIRECT PLUS LOAN * PCL Loans and LDS Loans are also at a fixed 5% * PCL Loans and LDS Loans are also at a fixed 5% 2
Subsidized vs. Unsubsidized Refer to page 9 Subsidized vs. Unsubsidized Refer to page 9 Sub si dy [suhb-si-dee] noun - Financial assistance granted by the government to cover accruing interest while in-school, in grace, or in a qualifying deferment. Direct Subsidized Perkins* Primary Care Loans Loans for Disadvantaged Students* Institutional Loans (some) Consolidation Loans (underlyng subsidized loans) Subsidized Direct Unsubsidized Direct PLUS Private Loans Institutional Loans (some) Consolidation Loans (underlying unsubsidized loans) Unsubsidized Source: www.dictionary.com * subsidy and deferment rights lost during consolidation Capitalization Refer to page 12 Addition of unpaid interest to the principal Debt Management Tip If possible, pay the interest on unsubsidized loans PRIOR to capitalization Principal + Interest = Larger Principal Questions? A Peek At Repayment Please give us your feedback! aamc.org/entrancetufts 3
Grace Refer to page 19 Grace Refer to pages 13-14 The path for some loans Options During Residency Refer to pages 17-19 Two paths to choose from during residency Postpone Payments Refer to pages 17-19 Deferment Postpone Payments Deferment Forbearance Make Payments Must apply and qualify Interest is waived on subsidized loans Forbearance Must request from servicer Interest accrues on all loans Medical Residency Forbearance available NOTE: For more details, or to request a deferment or forbearance, contact the servicer of the loan. Options During Residency Refer to pages 21-27 During residency, there are two choices: Repayment Plans Refer to page 22 $3,220/mo Make Payments $1,920/mo Postpone Payments Select a Repayment Plan $1,550/mo * (and New Borrower Income-Based Repayment after 7/1/14) *New Borrowers on or after July 1 st, 2015 will have an IBR payment amount equal the PAYE payment amount. 4
Repayment Plans Refer to page 22 $3,220/mo $1,920/mo $1,550/mo Questions? $ 670/mo * (and New Borrower Income-Based Repayment after 7/1/14) * $ 430/mo $ 290/mo Please give us your feedback! aamc.org/entrancetufts *New Borrowers on or after July 1 st, 2014 will have an IBR payment amount equal the PAYE payment amount. Alternatives to Borrowing Refer to pages 33-34 Strategic Borrowing Faith & civic organizations Military NHSC S2S program www.aamc.org/stloan The cornerstone to avoid unnecessary debt saltmoney.org/aamcstudent Alternatives to Debt Financial aid office Family support Hospital, county and state programs Income-Driven Repayment plans Public Service Loan Forgiveness Borrow Wisely Borrow Wisely Refer to page 35 Refer to page 35 Direct Unsub. Private Monthly Payment Monthly Total Total PLUS Payment Interest Cost 10 Years $560 $25,400 $65,400 Monthly Payment Total Interest Total Interest Total Cost 10 Years $530 $21,000 $61,000 Total Cost 10 Years $760 $49,100 $89,100 5
How Will You Borrow? Refer to page 36 How Will You Borrow? Refer to page 36 Do NOT borrow just because you are eligible Borrow what you need, not what you want Decline loans that exceed your need Accepting loans may affect eligibility for other aid Avoid forfeiting low rate loans for higher rate debt Living on Borrowed Money Financial Aid Fact If a shortfall occurs, previously declined monies may be obtained see financial aid for assistance The Total Cost M1 Gets Delivery Pizza (+ tip)... $25.00 After 4 Years of School. $32.00 After 4 Years of Residency... $41.00 10-Year Repayment Term.. $55.00+ OR 25-Year Repayment Term.. $84.00+ Questions? Have a Spending Plan Please give us your feedback! aamc.org/entrancetufts 6
Have a Spending Plan Refer to page 39 Have a Spending Plan Refer to pages 39-41 Live like a student while you are a student www.saltmoney.org/aamcstudent The Basics of Budgeting Refer to page 39 Your Total Income The Basics of Budgeting UNLOCKS DEEPER INSIGHT Your Total Expenses = Your Discretionary Income INTO YOUR BUDGET The Basics of Budgeting The Basics of Budgeting If Discretionary Income is Significant Ask Yourself 2 Questions Yes and Yes 1. Were you honest about your expenses? Consider sending it back, 2. Do you have enough to start a Nest Egg? Or borrow less next semester If Discretionary Income is a Negative Number Ask Yourself 2 Questions Congratulations 1. Are you budgeting for Needs or Wants? The purpose of your budget is served! 2. What alternatives might there be? Review expenses and make adjustments. 7
Spending Wants: Leaks Spending Wants: Leaks Small amounts add up over time It may not seem like much in the short term Consider the alternatives Savings can also add up quickly GOURMET $5/day, 5 days/week $100/month, 10 months $1,000/year = $4,000 $10/month 10 months/year $100/year $400 AT HOME The Minimum Payment Trap Refer to pages 49-51 $5,000 balance with an 18% interest rate (Making minimum monthly payments) Are Credit Cards Bad? Source: BankRate.com The Minimum Payment Trap Refer to pages 49-51 Questions? We need your feedback, please! aamc.org/entrancetufts Source: BankRate.com 8
A FICO Score is Based On Refer to pages 43-44 Credit: Understand & Protect Type of credit New credit 10% 10% 15% 30% Length of history Payment history 35% Amount owed How to Improve Your Score Refer to page 43 Refer to pages 43-45 During medical school, be sure to: Pay bills on time Pay down debt on lines of credit Apply for credit sparingly Check your Credit Report www.annualcreditreport.com Support Along The Way studentaid.ed.gov/repay-loans/disputes An investment in knowledge always pays the best interest Financial Aid Office & Residency Programs www.aamc.org/first Medloans Organizer & Calculator www.aamc.org/first StudentLoans.gov Saltmoney.org/AAMC 9
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