Money Management For Medical School Students Entrance Interview Presenter s name Presenter s title Fall 2016 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of June 2016 and are subject to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options.
Agenda Know The Details of Your Loans Understand The Repayment Timeline Borrowing Strategically Have a Spending Plan Protect Your Credit
Resources Education Debt Manager (EDM) PDF download www.aamc.org/first/matriculating-edm
An investment in knowledge always pays the best interest
Class of 2015 Indebtedness Refer to page 1 Median MD School Debt: $183,000 PUBLIC PRIVATE $180,000 $200,000 Source: AAMC 2015 Graduate Questionnaire (GQ) 81% of class report having educational debt 45% report debt of $200,000 or higher
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
The Details of Your Loans
Medloans Organizer and Calculator Refer to page 3 A free tool for MD students! www.aamc.org/medloans
Master Promissory Note (MPN) Refer to pages 6-7 Is a contract with the lender Can be used for multiple years Read before signing Lists your rights & responsibilities
Rights and Responsibilities Refer to page 7 Prepay without penalty Request a shorter repayment schedule Change repayment plans Request a deferment or forbearance Request a copy of your MPN See the MPN for all rights
Rights and Responsibilities Refer to page 7 Make on-time loan payments Make payments despite nonreceipt of bill Notify servicer of changes in contact and personal info Notify servicer of changes to your enrollment status Attend Exit Counseling See the MPN for all responsibilities
A Serious Obligation Refer to page 7 Student loans must be repaid Manage your debt - don t let it manage you
Consequences Refer to page 7
Finding Your Federal Loans Refer to page 4 To access, provide your: FSA ID (username/password) www.nslds.ed.gov
Finding Other Loans To access, provide: Name Address Date of Birth SSN www.annualcreditreport.com
Fixed Interest Rates for the Class of 2016 Refer to page 10 2012-2013 2013-2014 2014-2015 2015-2016 PERKINS* PERKINS* PERKINS* PERKINS* DIRECT UNSUBSIDIZED DIRECT UNSUBSIDIZED DIRECT UNSUBSIDIZED DIRECT UNSUBSIDIZED DIRECT PLUS DIRECT PLUS DIRECT PLUS DIRECT PLUS * Perkins, PCL and LDS Loans are disbursed at a fixed rate of 5%. All loans shown have a fixed interest rate.
During Medical School Refer to pages 9-10 Interest Rates ( 16-17 LOANS) DIRECT UNSUBSIDIZED LOAN DIRECT PLUS LOAN * PCL Loans and LDS Loans are also at a fixed 5%
Subsidized vs. Unsubsidized Refer to page 8 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. Source: www.dictionary.com
Subsidized vs. Unsubsidized Refer to page 8 Direct Subsidized Perkins* Primary Care Loans Loans for Disadvantaged Students* Institutional Loans (some) Consolidation Loans (underlyng subsidized loans) Direct Unsubsidized Direct PLUS Private Loans Institutional Loans (some) Consolidation Loans (underlying unsubsidized loans) Subsidized Unsubsidized * subsidy and deferment rights lost during consolidation
Capitalization Refer to page 11 Addition of unpaid interest to the principal Principal + Interest = *Based on interest rates for a Class of 2016 graduate Larger Principal
Debt Management Strategy Refer to page 11 Send voluntary payments 1) separate from required payments 2) with instructions to apply the payment: -- immediately -- towards the highest % rate loan If possible, pay the interest on your loans - before they capitalize!
NOTICE: Repayment Begins Refer to page 8 If dropping below half-time or withdrawing Contact the Financial Aid Office Exit Counseling is required Payments are required (or grace periods begin)
NOTICE: Repayment Begins Refer to page 16 Know the facts about Direct PLUS Loans
The Repayment Timeline
Grace Refer to pages 13-14 The path for some loans
Grace Refer to pages 13-14
Options During Residency Refer to pages 15-17 There are two choices during residency: Postpone Payments Make Payments Deferment Forbearance
Postpone Payments Refer to pages 15-17 Deferment 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 19-28 During residency, there are two choices: Make Payments Postpone Payments Select a Repayment Plan
Repayment Plans: Overview Refer to page 20 $2,370/mo $1,380/mo $1,080/mo $ 690/mo * $ 440/mo Pay As You Earn (PAYE)*** Revised Pay As You Earn (REPAYE) (and New Borrower Income-Based Repayment after 7/1/14) $ 300/mo *Based on an original principal balance of $183,000. **New Borrowers on or after July 1 st, 2014 will have an IBR payment amount equal the PAYE payment amount.
Estimated Monthly Payments Refer to pages 32-33 www.aamc.org/first/estimator
Strategic Borrowing
Alternatives to Borrowing Refer to pages 37-38 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 Refer to page 39 PCL / LDS
Borrow Wisely Refer to page 39 Direct Unsub. PLUS Private Monthly Payment Monthly Payment Monthly Payment Total Interest Total Interest Total Interest Total Cost 10 Years $490 $19,000 $59,000 Total Cost 10 Years $530 $23,000 $63,000 Total Cost 10 Years $760 $51,000 $91,000
How Will You Borrow? Refer to page 40 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
Financial Aid Fact If a shortfall occurs, previously declined monies may be obtained see financial aid for assistance
Borrow Wisely Refer to page 40 TIP: Have a budget and save money
Have a Spending Plan
Have a Spending Plan Refer to page 43 Live like a student while you are a student
Have a Spending Plan Refer to pages 43-46 www.saltmoney.org/aamc
The Basics of Budgeting Refer to page 44 Your Total Income Your Total Expenses = Your Discretionary Income
Spending Wants: Leaks Small amounts add up over time It may not seem like much in the short term $5/day, 5 days/week $100/month, 10 months $1,000/year = GOURMET $4,000
Spending Wants: Leaks Consider the alternatives Savings can also add up quickly $10/month 10 months/year $100/year $400 AT HOME
Are Credit Cards Bad?
The Minimum Payment Trap Refer to page 45 $5,000 balance with an 18% interest rate (Making minimum monthly payments) Source: BankRate.com
The Minimum Payment Trap Refer to page 45 Source: BankRate.com
Credit: Understand & Protect
A FICO Score is Based On Refer to pages 51-52 New credit 15% Type of credit 10% 10% Payment history 35% Length of history 30% Amount owed
How to Improve Your Score Refer to pages 51-52 During medical school, be sure to: Pay bills on time Pay down debt on lines of credit Apply for credit sparingly
Refer to page 53 Check your Credit Report www.annualcreditreport.com
Support Along The Way studentaid.ed.gov/repay-loans/disputes Medloans Organizer & Calculator www.aamc.org/first Financial Aid Office & Residency Programs www.aamc.org/first StudentLoans.gov Saltmoney.org/AAMC 2015 Association of American Medical Colleges. All rights reserved.
Questions? FIRST@aamc.org