- Confidential Document, Property of Graduate Leverage, LLC - Dental Students’ Finances: A Strategic Approach to Debt Management *Detailed assumptions.

- Confidential Document, Property of Graduate Leverage, LLC -

Dental Students’ Finances:A Strategic Approach to Debt Management

*Detailed assumptions are available upon request

Andrew Franger

ASDA Eastern Regional

Microsoft Office Word 2003.lnk


Changes in Student Debt Levels

Debt levels have more than tripled in the last 17 yearsDebt levels have more than tripled in the last 17 years

~$50k

~$115k

1993 2003

~$190K

2010

* Based on data collected by ADEA and GL internal student database



Agenda

1. Regulatory & Market Update

2. Federal Loan Opportunities and Strategies

3. Private Loan Opportunities

TWO PRIMARY OBJECTIVES:

•Maximize your Liquidity

•Lower the Cost of your Debt

TWO PRIMARY OBJECTIVES:

•Maximize your Liquidity

•Lower the Cost of your Debt


Regulatory & Market Update

• New Income-Based Repayment (IBR) plan provides low payment and interest subsidies (July 1, 2009)

• Budget Control Act of 2011 eliminates Subsidized Stafford loans for graduate students (July 1, 2012)

• Improvements in private student loan markets may present opportunities for certain borrowers

*Based on borrowing $40,500 each year for 4 years of dental school. 10 Year Repayment term.

Impact of Subsidy Removal

Debt Ceiling Legislation (Budget Act 2011) resulted in the following changes:– After 2012 Graduate Students will not receive

subsidized Stafford Loans– Eliminates on-time payment incentives (rebate)

2012 Grad

2013 Grad

2014 Grad

2015 Grad

2016+ Grad

Payment Increase (10 yr term) -

$864 $2,527 $4,988 $ 8,248


Significantly Reduce Payments:

• Income-Based Repayment Plan (IBR): PARTIAL SUBSIDY

• Limits payment to 15% of discretionary income (changes to 10% in 2014*)

• Subsidized interest not covered by reduced payment is paid by government

• Subsidy limited to 3 years

• Extended Repayment Plans: NO SUBSIDY

• Consolidation 30 year Term

• Extended 25 year Term

Payment Reduction Options

Postpone Payments:

• In-School Deferment: FULL SUBSIDY

• Economic Hardship Deferment (EHD): FULL SUBSIDY

• Forbearance: NO SUBSIDY


Total Savings :

3 Scenarios, 3 Strategies

Graduate A Graduate B Graduate C

Best Approach:

Payment:

Salary:

Tax Savings :

$190,000 of debt. (weighted interest rate 7.05%)

Liquidity, Tax Savings, & Subsidy SavingsLiquidity, Tax Savings, & Subsidy Savings

Based on current IBR Regulations as of July 1st 2009

IBR EHD IBR

$40,000 $90,000 $90,000

Subsidy Savings:

$47 $0 $322

$2,296 $2,312 $1,706

$73 $0 $398

$2,369 $2,312 $2,104


Other Benefits of Reduced Payment

Consolidation – 4.75%

Fixed Stafford Loan – 6.8%Loans

Repayment Period

Standard Repayment

Private Loan - 9.25%

Grad PLUS – 8.5%

8 yrs 10 yrs

Effective Rate (APR) = 5.69%

10 yrs

4.75%

Targeted Repayment

Non-payment

9.25%

6.8%Non-payment

8.5%Non-pay

1/2 yrs 1 yrs 7 yrs

Effective Rate (APR) = 6.29% $11,675$11,675

Structured Payment Strategy

*Assumes $168,000 in federal debt and $8,000 in private loans


Should I Be Investing?

1960 1987 2001

7.4% Average S&P Return (A/T)

7.4% Average S&P Return (A/T)

0%

8%

16%

1940

PLUS Loan

S&P 500

Returns

8.1% AveragePLUS Return

8.1% AveragePLUS Return

Sources: Yale Econ/Robert Shiller, Standard & Poor’s, Federal Reserve, Bloomberg

All Returns Here Are All Returns Here Are After Tax


7.9%

(For Illustrative Purposes Only – assumptions based on good credit & sample lenders)

Private Loan Market Update

*Research conducted by GL

%

Historical Private Loans

Index

Margin

5.5%

LIBOR, Prime, etc.

Pre-Credit Crisis

%

Current

Private Loan Market

Has Improved

Index

Margin

4.9%

Grad PLUS

A Low Rate “Fixed” Option May Provide Significant SavingsA Low Rate “Fixed” Option May Provide Significant Savings

3%

Index

Margin

10.9%

During Credit Crisis

Interest Rates Increase?

Index

7.5%

Margin

?


What every dental student with student loans should do:

1. Understand Your Debta) What kind of loans do I have? (Federal Stafford, GRAD Plus, Perkins, etc.)

b) Who is my lender? (Federal Direct, Federal through Private Lender, Non-Federal Private Lender)

c) What are the interest rates on my loans? (fixed, variable, 6.8%, 7.9%, 8.5%, etc.)

2. Prepare & File Taxes Advantageouslya) Preparation in fall of final year to understand tax implications for loan subsidy programs

b) Understand the trade-off of filing jointly with spouse

c) File taxes in final year as appropriate

3. Position Loans for Maximum Savingsa) Subsidy: Income, tax status, family size, career path, loan portfolio, and application timing impact which

program will provide greatest benefit

b) Evaluate Refinancing opportunities

c) Initiate evaluation and preparation prior to graduation

4. Allocate additional funds appropriately a) Only invest when returns exceed cost of debt and liquidity issues met

b) Understand implications of retirement accounts on subsidy programs

Dental Student Action Plan


within 1 week

Support Process

Personal Info Card

Fill out Card

Review Personalized Assessment

Retain GL Advisor to Carry Out Process

Complete Process Yourself

Execute Debt Management Objectives

GL Advisor Can Help GL Advisor Can Help

Contact Info:[email protected]

Cell: 847-894-2050Main: 877-552-9907

Overview• We have compiled and analyzed your personal debt portfolio in order to determine

the optimal debt management strategy. The tasks outlined below include each step required to minimize your cost of debt.

• Below your task list you will also find a detailing of the savings as well as your loan portfolio for your records.

Required Tasks To Achieve Plan Objective:1. November 15, 2010: Consolidate all low rate loans as initial in-school application

2. February 15, 2011: Complete Add-on Consolidation application form to include all low rate loans occurred in spring disbursement

3. March 1, 2011: Verify in-school deferment status on all consolidated loans to prevent payment and ensure subsidy

4. March 20, 2010: Complete tax filing process according to specific filing status: i)Non-Exempt: File using deductions for AGI to maximize subsidy and minimize

- Confidential Document, Property of Graduate Leverage, LLC - Dental Students’ Finances: A Strategic Approach to Debt Management *Detailed assumptions.

Documents

subsidy slide

property of graduate

llc slide

debt slide

confidential document

private loans slide

subsidy savings

graduate students