WHILE IN SCHOOL 3/28/2016 STUDENT LOAN TIPS YOU NEED TO KNOW AGENDA. Joseph Reinke, CFA While In School When You Graduate

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1 STUDENT LOAN TIPS YOU NEED TO KNOW Joseph Reinke, CFA AGENDA While In School When You Graduate Define the strategies that work for YOU Find the right financial product(s) for YOU Stick to your strategies 2 WHILE IN SCHOOL 3 1

2 WHILE IN SCHOOL You Could Cruise Don t pay during school Don t pay during grace period Or Be Proactive Make $100 payments while in school Start full repayment on graduation day 4 BE PROACTIVE 5 WHY DOES THIS HAPPEN? Loan Balance $ $112,275 $100k $107,650 Cruise Be Proactive Graduation End of Grace Period Years 6 2

3 AFTER GRADUATION 7 8 PREPAYMENTS 9 3

4 APPLYING PREPAYMENTS THE RIGHT WAY LENDERS apply prepayments against next payment YOU want them to apply prepayments against loan balance 10 PREPAYMENTS DONE RIGHT When was the last time you made over $1,000/hour? 11 EXTENDING 12 4

5 EXTENDING Monthly Payment Decrease by $752 Combined Cumulative Payments Increased by $86, EXTENDING AND PREPAYING 14 EXTENDING AND REPAYING Apply all (or part) of the amount you re saving monthly to repay your loans faster Always start with the loan with the highest interest rate Be disciplined when repaying Remember, if you simply extend, you ll end up paying a LOT more 15 5

6 COMPARISON $ Loan Balance Years 16 CONSOLIDATING 17 CONSOLIDATING Combining multiple loans into a single loan It is sometimes possible to extend the term 18 6

7 CONSOLIDATING Pros Makes life easy Potentially lower monthly payments if using a longer term Cons Can no longer use a Repay strategy If longer term, you ll pay much more in the long run HOW MUCH IS CONVENIENCE AND POTENTIALLY A LONGER TIMELINE WORTH TO YOU? 19 REFINANCING 20 REFINANCING Pros Save money Better terms Cons May lose some benefits 21 7

8 REFINANCING Replacing an existing loan with a new one Lower interest rate? Different term? Additional benefits? (deferral etc.) All of the above? 22 WHY REFINANCE AFTER YOU GRADUATE Because you re a better person! Lower Risk of Default Graduated, employed, work history, payment history Eligible for new personalized products Leverage the power of Human Capital

9 TRADITIONAL LOAN PRODUCTS Fixed rate loan Payments are set. No uncertainty, but no flexibility Variable rate loan Payments will change, but it s all out of your control 25 NEW(ER) PRODUCTS New(er) Product: Income Share Agreement: Payments are a percentage of YOUR earnings Flexibility is directly linked to your personal situation 26 INCOME BASED REPAYMENT IBR is a loan with repayment based on income It s reactive, not proactive Amount owed keeps going up If forgiven, the forgiven amount is taxed as revenue 27 9

10 PUBLIC SERVICE LOAN FORGIVENESS Non-profits, government, 120 payments, fulltime, have to be in income-based progrom, debt to income, only Federal loans. The Good Potential savings Forgiven amount not taxable Lower monthly payments The Bad Unproven (first one to qualify is October 2017) Keep track of work (must verify once a year or all at once at the end) Negative amortization so not recommended to change plans 28 INCOME SHARE AGREEMENT (ISA) ISA Payments as a percentage of income You earn less? You pay less You earn more? You repay faster Unmatched flexibility 29 HUMAN CAPITAL Your Past, Present, and Future Future Earnings What you are developing today What you have developed in the past Measures future earnings ability and risk to those future earnings 30 10

11 SO YES IT CAN BE A BIT OVERWHELMING Income Share Agreement 31 TOTAL LEVERAGE How Much In Student Loans Should I Have When I Graduate? 32 WE RE HERE TO HELP! FITBUX.COM FITBUXARTICLES.FITBUX.COM FITPT.FITBUX.COM jreinke@fitbux.com 33 11