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Student Loans and Debt Management
Exit Interview
Cheri MarksCoordinator of Financial Aid and Student Records Spring 2012
Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2012 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss exact loan balances and repayment options.
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©2012 Association of American Medical Colleges. All rights reserved.
86% of class report having educational debt
59% of class report debt $150,000 or higher
Public Schools
Private Schools
All Schools
Mean $150,612 $176,675 $161,290
Median $155,000 $180,000 $162,000
Class of 2011 IndebtednessRefer to page 1
Source: FIRST analysis of AAMC 2011 GQ data. Education debt figures include premedical debt.
education debt.
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“An investment in knowledge always pays
the best interest”
- Benjamin Franklin
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Agenda
Know Your Loan Portfolio
How to Postpone Payments
Repayment Plans
Options During Residency
Other Considerations
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©2012 Association of American Medical Colleges. All rights reserved.
Know Your Loan Portfolio
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©2012 Association of American Medical Colleges. All rights reserved.
Master Promissory Note
Refer to page 7
A contract with the lender
Has a multi-loan feature
Details Terms and Conditions
Rights and Responsibilities
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©2012 Association of American Medical Colleges. All rights reserved.
Rights include the ability to:
Prepay any federal loan without penalty
Request a shorter repayment schedule
Change repayment plans
Request a deferment or forbearance
Review your promissory note for all rights
Refer to page 7
Rights and Responsibilities
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©2012 Association of American Medical Colleges. All rights reserved.
Rights and Responsibilities
Responsibilities include:
Make on time loan payments
Make payments despite receipt of bill
Notify the servicer of changes in contact info
Attend an Exit Counseling session
Review your promissory note for all responsibilities
Refer to page 7
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©2012 Association of American Medical Colleges. All rights reserved.
A Serious Obligation
Student loans must be repaid
Manage your debt -don’t let it
manage you
Refer to page 7
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©2012 Association of American Medical Colleges. All rights reserved.
Delinquency
Default
Refer to page 8
Consequences of…
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©2012 Association of American Medical Colleges. All rights reserved.
Terms and Conditions
Discharge may be available in cases of:
Review your promissory note for all terms
REFUND ERROR
Refer to page 9
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©2012 Association of American Medical Colleges. All rights reserved.
Finding Your Federal Loans
To access, provide:
SSN
Date of Birth
First 2 letters of last name
FAFSA PIN (www.pin.ed.gov)
www.nslds.ed.gov
Refer to page 3
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©2012 Association of American Medical Colleges. All rights reserved.
Finding Federal Servicers
Contact FSA at:
1-800-433-7327
Or email:
[email protected]
www.studentaid.ed.gov
Refer to page 4
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©2012 Association of American Medical Colleges. All rights reserved.
Interest RatesRefer to page 12
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Repayment Strategy
Prioritize repayment efforts – pay the most expensive
debt FIRST!
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©2012 Association of American Medical Colleges. All rights reserved.
Capitalization
Addition of unpaid interest to the principal
Principal + Interest =Larger
Principal
$155,000$176,770
$21,770
Refer to page 12
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Repayment Strategy
Pay the interest on unsubsidized loans PRIOR to
capitalization
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©2012 Association of American Medical Colleges. All rights reserved.
Loan Repayment TimelineRefer to page 13
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©2012 Association of American Medical Colleges. All rights reserved.
How to Postpone Payments
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©2012 Association of American Medical Colleges. All rights reserved.
Deferment
A period when payments are not required
Must apply and qualify
Interest does not accrue on subsidized loans
Unsubsidized loans continue to accrue interest
NOTE: For more details on forbearance or to request a forbearance, contact your servicer.
Postponement OptionsRefer to page 15
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©2012 Association of American Medical Colleges. All rights reserved.
Postponement OptionsRefer to page 16
Forbearance
A period when payments are not required
Must request from the servicer
Interest accrues on sub and unsub loans
Many types (administrative, discretionary, mandatory)
NOTE: For more details on forbearance or to request a forbearance period, contact your servicer(s).
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©2012 Association of American Medical Colleges. All rights reserved.
ForbearanceRefer to page 16
Mandatory Medical Residency/Internship
Use to postpone payments
Interest accumulates on sub and unsub loans
Request annually from servicer
Continuous periods may avoid capitalization*
*Check your servicer’s capitalization policy
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©2012 Association of American Medical Colleges. All rights reserved.
Repayment Plans
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©2012 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Determines the payment
amount &
interest cost
Refer to page 18
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©2012 Association of American Medical Colleges. All rights reserved.
Equal monthly payments Higher monthly payments Lower total cost
Repayment Plans
Repayment term of 25 years Low monthly payment Likely the most expensive option
Refer to page 18
tempadmin
Change Low to: Lower
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©2012 Association of American Medical Colleges. All rights reserved.
Lower initial payments (tied to income)Possible higher total cost
Repayment Plans
Payments start low, increase over time Possible higher total cost
Likely the lowest monthly payment
Refer to page 19
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©2012 Association of American Medical Colleges. All rights reserved.
Effects of each Repayment Plan on Total Cost
Repayment PlansRefer to page 24
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Debt FactThe lower the monthly payment…
the higher the interest cost
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©2012 Association of American Medical Colleges. All rights reserved.
Estimated Monthly Payment Amounts
Repayment PlansRefer to pgs 22-23
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Repayment Strategy
To reduce the cost of student loans -
make extra payments
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©2012 Association of American Medical Colleges. All rights reserved.
Options During Residency
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©2012 Association of American Medical Colleges. All rights reserved.
The most feasible options during residency:
Pay Later (using Forbearance)
Pay Now (using Income-Based Repayment)
Refer to pgs 24-25
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©2012 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Benefits
Partial interest subsidy during the first 3 years
Unpaid interest does not capitalize when:
• Annual paperwork is filed timely
• Borrower demonstrates a PFH
Possible loan forgiveness
*As reported to the IRS. Annual verification required of both AGI and family size
Refer to page 20
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©2012 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
To enter IBR, borrower must
Contact each servicer individually to request
Give access to household AGI* (tax records)
Inform servicer(s), annually, of family size
Demonstrate a Partial Financial Hardship (PFH)
*As reported to the IRS. Annual verification is required of both AGI and family size.
Refer to page 20
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©2012 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Formula for a Partial Financial Hardship (PFH):
Standard payment* > IBR payment
More likely when income is low and debt is high Max payment in IBR is the Standard amount* 1st post-M.D. year median stipend is $48,700**
• As originally determined when calculating Partial Financial Hardship based on $185,000 entering repayment ($162000 total education debt plus $23,000 of capitalized interest from 4-years of school and 6-months of grace).
• **Preliminary data from AAMC Survey of R/F Stipends and Benefits and AAMC Analysis
$2,130 / mo* $410 / mo
Refer to page 20
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©2012 Association of American Medical Colleges. All rights reserved.
Income-Based Repayment
Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size
Online IBR Calculators
www.aamc.org/FIRST
www.IBRinfo.org
www.studentaid.ed.gov
Refer to page 20
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©2012 Association of American Medical Colleges. All rights reserved.
Other Considerations
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©2012 Association of American Medical Colleges. All rights reserved.
Eligible Loans
Qualifying Payments
Qualifying Work
Public Service Loan Forgiveness
+
+
Loan ForgivenessRefer to page 37
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©2012 Association of American Medical Colleges. All rights reserved.
Other programs listed at AAMC website:
Loan Forgiveness
www.aamc.org/stloan
NIH Loan Repayment Programs:
NHSC Repayment Program:
www.lrp.nih.gov
www.nhsc.hrsa.gov/loanrepayment
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©2012 Association of American Medical Colleges. All rights reserved.
Private Loans
Details of Private Loans
Typically unsubsidized for life of loan
A grace period/forbearance may be available
Cannot be included in IBR or PSLF
Be cautious when consolidating private loans
Refer to page 41
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©2012 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
When to consider consolidation:
Variable rates are low
Multiple servicers to repay
To obtain Public Service Loan Forgiveness (DL)
To make Perkins or LDS loans eligible for IBR
Refer to page 38
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©2012 Association of American Medical Colleges. All rights reserved.
Federal Loan Consolidation
Effects of consolidating
A longer term will increase the interest costs*
Able to prepay or change repayment plan
A new loan with new benefits**
May negatively affect grace, deferment, cancellation or forgiveness options
* The rate will be a weighted-average that may be rounded up to the nearest 1/8th
** Forfeiture of original borrower benefits is likely. Future borrower benefits vary by lender.
Refer to page 38
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©2012 Association of American Medical Colleges. All rights reserved.
Special Direct Consolidation
Available January, 2012 thru June 30, 2012
Must have loans owned by Direct Loans
Must have loans owned by a FFEL lender
Do NOT initiate a consolidation online
Federal servicers will contact eligible borrowers
Refer to page 38
studentaid.ed.gov/specialconsolidation
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©2012 Association of American Medical Colleges. All rights reserved.
Full Deduction Partial Deduction NO Deduction
Single $60,000 or less $60,001 to $74,999
$75,000 or more
Married filing
Jointly
$120,000 or less
$120,001 to $149,999
$150,000 or more
www.irs.gov/publications/p970
Taxpayer Relief Act of 1997
Student loan interest deduction max $2,500 per year
Voluntary payments may be eligible
Capitalized interest may be included
Refer to page 40
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©2012 Association of American Medical Colleges. All rights reserved.
Check your Credit Report
www.annualcreditreport.com
Refer to page 27
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©2012 Association of American Medical Colleges. All rights reserved.
The FIRST Stop…
www.aamc.org/FIRST
Medloans® Organizer and Calculator
Refer to page 3
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©2012 Association of American Medical Colleges. All rights reserved.
Your residency program
Your loan servicers’ and their websites
Your medical school financial aid office
The Next Steps
FACEBOOK: FIRST for Medical Education
www.aamc.org/FIRST
www.ombudsman.ed.gov
Twitter: @FIRST
Refer to page 42
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Questions?
[email protected]