Strategic Planning. for Medical School Students. Spring 2011

Transcription

1 FIRST for Medical Education Financial Information, Resources, Services, and Tools Strategic Planning for Medical School Students Annie Osborne Resource Advisor UCSF Student Financial Aid (415) Spring 2011 Important: All information and estimates are based on AAMC interpretation of federal regulations as of February 2010 and are subject to change. These are estimates only. Students should always contact their lender/servicer(s) to discuss exact loan balances and repayment options.

2 Strategic Planning During Med School Reassess your loan portfolio Changing federal landscape Loan options taking time off residency Will loan forgiveness apply to you? Actively managing your loans

3 Class of 2010 Indebtedness All Schools Public Schools 86% of class report having educational debt 59% of class report debt $150,000 or higher UCSF Class of 2011 Indebtedness: Mean $113,007* Private Schools Mean $157,944 $148,222 $172,422 Median $160,000 $150,000 $180,000

4 Where will you be 2 years from now? Average Debt $140,000 Balance at Repayment $159,000 $1,831/month for 10 years Total principal + interest = $220,000 Or $1,104/month for 25 years Total principal + interest = $331,000

5 What options will you have? Repayment Standard 10-yr repayment = $1,831/mo IBR = $400/mo through residency Forbearance accrued principal and interest grow to $206K Loan forgiveness programs NHSC, work for 2+ years, $50K+ forgiven Public Service Loan Forgiveness, IBR during residency (10 years total)

6 Reassess Your Loan Portfolio

7 Normal MS4 Student Loan Portfolio* (Undergrad) DL Cons. Loan sub/unsub Rate: 4.75% Servicer: Direct Loans Lender: Dept. of Ed (MS3) FFEL Stafford sub/unsub (SOLD) Rate: 6.8% Servicer: DOE/Nelnet Lender: DOE (Direct Loans) (MS1) FFEL Stafford sub/unsub Rate: 6.8% Servicer: Great Lakes Lender: Northstar (formerly THE) (MS4) FFEL Stafford sub/unsub Rate: 6.8% Servicer: DOE/Great Lakes Lender: DOE (Direct Loans (MS2) FFEL Stafford sub/unsub Rate: 6.8% Servicer: ACS Lender: B of A (MS1-MS4) Institutional Loans Perkins (sub) 5% HPSL/LDS (sub) 5% University (sub) 5% Servicer: ACS (CPS) Lender: UCSF * Example is fictitious and not based on any individual student s loan portfolio ** Estimates from Dept. of Ed.

8 Normal MS4 Student Loan Portfolio Servicers (4+) Grace Periods (4) Direct Loans ACS (CPS/FFEL) DOE/Nelnet Great Lakes DOE/Great Lakes Staf./Un. Loans (6 months) Cons. (none) Perkins (9 months) HPSL/LDS (1 year) Lenders (4) Interest Rates (3) Dept. of Ed. Stafford > 06: 6.8% T.H.E./Northstar Consolidated: 4.75% Bank of America Perkins/HPSL/LDS/Un: 5% UCSF

9 Changes in Student Loan Industry To ensure that the Department of Education could handle volumes of loans sold to the government and any additional Direct Loan volumes, the Department has entered into agreements with four additional servicers. (Department of Education: November 5, 2009) Selected Additional Federal Loan Servicers* Department of Education/Great Lakes Department of Education/Nelnet Department of Education/Sallie Mae Department of Education/PHEAA ) *Source: Department of Education: November 5, 2009

10 Finding Federal Loans To access provide your: Social Security # Date of Birth First 2 letters (last name) PIN # (

11 Who must you repay? Create a spreadsheet for ALL of your loans You must repay your current loan servicer/lender Loan Type/ Account # Name: Loan Servicer Name: Lender Stafford PLUS Address: Phone Number: Website: Name: Address: Phone Number: Address: Phone Number: Website: Name: Address: Phone Number: Website: Website: Information about the current loan holder/servicer of your Title IV federal student loans is stored in the NSLDS at: Table courtesy of Jeff Hanson, Access Group

12 UCSF (University) Loans ACS: CPS Division Campus Based Student Loan Program & UCSF Student Accounting Health Professions Loan, University Loan, Perkins Loan, Loan for Disadvantaged Students

13 Finding Other Loans

14 What You Can Do Now Register online with servicer Update contact info Develop a spreadsheet itemizing: Servicer/lender Loan type (sub or unsub) Interest rates Grace period Capitalization policy Deferment options Date entering repayment Repayment options

15 The FIRST Stop Medloans Organizer and Calculator

16 Subsidized vs. Unsubsidized Subsidized Subsidized Stafford Perkins* Primary Care Loans LDS Loans* Institutional Loans Consolidation Loans (underlying eligible subsidized loans) Unsubsidized Unsubsidized Stafford Grad PLUS Private Loans Consolidation Loans (underlying unsubsidized loans) *subsidy and deferment rights lost during consolidation

17 Interest Rates Stafford Loans 6.8% Direct PLUS Loans 7.9% or 8.5% Perkins Loan / PCL / LDS 5.0% Private Loans Institutional Loans DL Consolidation Loans Typically Variable Check the Promissory Note Varies by Loan Check the Promissory Note Fixed rate based on weighted average interest rate of underlying loans rounded up to nearest one-eighth of a percent (capped at 8.25%)

18 Capitalization Refer to page 11 Addition of unpaid interest to the principal Principal + Interest = Larger Principal

19 Pay the interest on unsubsidized loans PRIOR to capitalization A Debt Management Strategy

20 Include in your Loan Portfolio Premedical/college educational debt Ensure existing student loans are in good standing Consumer debt Private loans Credit card balances Car loans Tip: Organization is critical to effective debt management

21 Loan Repayment Begins If dropping below half-time or withdrawing: Contact the Financial Aid Office immediately Exit Counseling is required Payments are required or grace periods begin

22 What You Can Do Now Find your student loans & identify all loan servicers Federal loans - nslds.ed.gov Institutional loans ACS & UCSF Student Accounting Perkins/University Loans/HPSL/LDS Private loans, consumer debt annualcreditreport.com Register online with servicer & update contact info Balance, accrued interest, interest rates, grace period Deferment options & enrollment status Borrow ONLY what you need Direct GradPlus

23 Grace, Deferment, Forbearance, and Repayment Options

24 Options During Residency/Research During residency or research, you have two choices: Postpone Payments Grace period Eligible deferment Forbearance Make Payments Select a Repayment Plan

25 Grace Period Period of time following graduation (or LOA) when you are not required to make payments on your loans Automatic, you do not have to apply Subsidized loans are interest free to the borrower during grace period Unsubsidized loans continue to accrue interest Availability and duration is loan specific

26 Loan Repayment Timeline

27 Postponement Options Deferment Economic Hardship Deferment In-School Deferment Graduate Fellowship unlimited Military Alternatives Forbearance Repayment (Income Based Repayment)

28 Economic Hardship Deferment Must apply and qualify Eligibility criteria changed July 1, 2009 Subsidized loans do not accrue interest Unsubsidized loans continue to accrue interest Contact all loan servicers to apply Max EHD 36 months (qualify annually)

29 Education Related Deferments Graduate Fellowship Must apply and qualify Graduate fellowship coordinator certification Apply as soon as you begin fellowship Deferment Eligibility Chart

30 After Taking Time Off for Research Actively re-apply for In-school Deferment Enrolled full time Contact all loan servicers* Follow-up to ensure correct enrollment status * Most common cause for complications

31 Postponement Options Forbearance Used to postpone payments Requested annually from lender Interest accumulates on sub and unsub loans Continuous periods may avoid capitalization

32 Effects of Forbearance Estimated Monthly Payment Amounts Monthly Repayment Estimator

33 Run the Numbers

34 2010 Medical Graduate with $160K Student Loan Portfolio: Undergraduate debt: $10K * Medical School debt: $150K ** Graduates in 10 with $160k total education debt Enters repayment with $21k accrued interest Balance at repayment: $181,000 *Consolidated 4.75% ** Subsidized and Unsubsidized Stafford 6.8%

35 Repayment Plans Determines payment amount and interest cost Standard/Level Extended Graduated Income Contingent Income-Based Repayment (IBR) $2,100/mo $1,300/mo $1,000/mo $ 600/mo $ 380/mo

36 New Repayment Plan Income-Based Repayment (IBR) Payment based on household income/family size Debt/income partial financial hardship Annual verification required Unpaid interest paid on subsidized loans (first 3yrs)

37 IBR Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt (2009 Poverty Guidelines) Debt AGI $5,000 $20,848 $10,000 $25,451 $15,000 $30,055 $20,000 $34,658 $25,000 $39,261 $30,000 $43,864 $35,000 $48,467 $40,000 $53,071 $45,000 $57,674 $50,000 $62,277 $55,000 $66,880 $60,000 $71,484 Assumptions: - Interest rate = 6.8% - Household size of 1 residing in 48 contiguous states Debt AGI $65,000 $76,087 $70,000 $80,690 $75,000 $85,293 $80,000 $89,896 $85,000 $94,500 $90,000 $99,103 $95,000 $103,706 $100,000 $108,309 $105,000 $112,912 $110,000 $117,516 $115,000 $122,119 $120,000 $126,722 $125,000 $131,325 Courtesy: Jeff Hanson, Access Group

38 IBR Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt (2009 Poverty Guidelines) Debt AGI $130,000 $135,929 $135,000 $140,532 $140,000 $145,135 $145,000 $149,738 $150,000 $154,341 $155,000 $158,945 $160,000 $163,548 $165,000 $168,151 $170,000 $172,754 $175,000 $177,357 Debt Assumptions: - Interest rate = 6.8% - Household size of 1 residing in 48 contiguous states AGI $180,000 $181,961 $185,000 $186,564 $190,000 $191,167 $195,000 $195,770 $200,000 $200,374 $205,000 $204,977 $210,000 $209,580 $215,000 $214,183 $220,000 $218,786 $225,000 $223,390 Courtesy: Jeff Hanson, Access Group

39 IBR Plan Estimated PFH Monthly Payment in 2009 AGI Monthly Payment HH Size = 1 Monthly Payment HH Size = 2 $0 $0 $0 $10,000 $0 $0 $20,000 $47 $0 $30,000 $172 $102 $40,000 $297 $227 $50,000 $422 $352 $60,000 $547 $477 $70,000 $672 $602 $80,000 $797 $727 $90,000 $922 $852 $100,000 $1,047 $977 Assumes you reside in 48 states Courtesy: Jeff Hanson, Access Group

40 Income-Based Repayment (IBR) Online IBR Calculators Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower s family size

41 Loan Forgiveness Options Do they apply to you?

42 Public Service Forgiveness Eligible Loans + + Qualifying Payments Qualifying Work Public Service Loan Forgiveness

43 New Loan Forgiveness Program Public Service Loan Forgiveness Must make 120 loan payments to Direct Loans Must work 10 years in Public Service Does not have to be continuous work

44 Public Service Forgiveness Qualifying Work: Full-Time (30+ hours/week) Non-profit, tax exempt, 501(c)(3) organization* Federal, state, local or tribal government Military service Private organization providing a public service *includes most medical schools and teaching hospitals

45 Other Forgiveness Programs Loan Forgiveness Options NIH Loan Repayment Programs: NHSC Repayment Programs: Other programs listed at AAMC website:

46 Borrow Wisely

47 UCSF Alums: Strategies for Success Live like a student now so you can live like a doctor later Borrow only what you need Develop a budget and stick to it Purposeful, and personal Use resources to make intelligent choices Power of accrued interest Know your loan amt. and associated payment/mo. Feedback from others

48 Borrow Wisely Credit Card Private Loans Grad PLUS Loans Stafford Loans Perkins Loans and Grants

49 Are Credit Cards Bad?

50 The Minimum Payment Trap $2,000 financed at 19% - (making the minimum monthly payments equals): Over 18 years to pay off Pay more than $5,000 What could possibly be worth paying more than twice its original value? Bankrate.com

51 Understand and Protect Your Credit

52 What is a FICO Score Based On? Type of credit used New credit 10% 10% Payment history 35% 15% 30% Length of credit history Utilization rate (amount owed)

53 How to improve your score During medical school, be sure to: Pay bills on time Pay down debt on credit cards Apply for credit sparingly

54 Closing Details

55 What You Can Do Now Find your student loans & identify all loan servicers Federal loans - nslds.ed.gov Institutional loans ACS & UCSF Student Accounting Perkins/University Loans/HPSL/LDS Private loans, consumer debt annualcreditreport.com Register online with servicer & update contact info Balance, accrued interest, interest rates, grace period Know deferment options & enrollment status If possible, pay off accrued interest before repayment

56 Make Sound Decisions Research your repayment options Loan servicer websites (calculators to compare repayment plans) (Department of Education IBR and PSLF) (IBR and PSLF) Investigate deferment options Should I consolidate? Pay off expensive debt more aggressively Consider ALL debt in loan portfolio

57 The FIRST Stop Medloans Organizer and Calculator

58 Support Along the Way Loan Servicers & Websites UCSF Financial Aid Office AAMC.org/FIRST Finaid.org Studentaid.ed.gov IBRinfo.org U C S F A N U C C E E D I N A N C I A L L Y