Student Loans Repayment Strategies. Ana Nastich Health Sciences Financial Aid

Transcription

1 Student Loans Repayment Strategies Ana Nastich Health Sciences Financial Aid

2 Educational debt Average Indebtedness - Class of 2013 Private * $142,849 Public* $103,829 UCSD $94,210 *Per American Association of Colleges of Pharmacy Pharmacy Graduating Student Survey 2012 Please note: 2012 UCSD Average Indebtedness was $101k

3 Pharmacist national wages Average Pharmacist Salary is $114,915 Top Paying Industries Top Paying states State Pharmaceutical Manufacturing Office Admin. Services General Merchandise Stores Offices of Physicians Outpatient Care Centers Annual Average $123,680 $123,580 $122,810 $120,310 $119,250 State Alaska $129,170 Maine $128,030 California $125,800 Vermont $125,520 Delaware $121,830 Annual Average *Per U.S. Bureau of Labor Statistics - Occupational Employment Statistics

4 topics KNOW YOUR LOAN PORTFOLIO HOW TO POSTPONE PAYMENTS REPAYMENT PLANS OTHER CONSIDERATIONS QUESTIONS

5 KNOW YOUR LOAN PORTFOLIO

6 Finding your Federal Loans

7 NSLDS Report

8 Knowing your servicer Name Phone number Website Direct Loan Servicing (800) Great Lakes (800) NelNet (888) SallieMae (800) PHEAA (800) ACS** (800)

9 Where to find your servicer

10 Interest Rates In School, Grace & Deferment Forbearance & Repayment Stafford & Direct Loans 6.8% 6.8% (disbursed on or after 7/1/06) Fixed Fixed Stafford Loans* 1.79% 2.39% (disbursed between 7/1/98 6/30/06) Variable Variable Grad PLUS Loans 8.5% 8.5% Fixed Fixed Direct PLUS Loans 7.9% 7.9% Fixed Fixed Perkins Loan 5.0% 5.0% Fixed Fixed HPSL 5.0% 5.0% Fixed Fixed Consolidation Loans Private Loans Fixed rate - based on weighted average interest rate Typically Variable Check Prom Note

11 Prioritize repayment efforts pay the most expensive debt FIRST!

12 Capitalization Addition of unpaid interest to the principal $182,670 $160,000 $22,670 Principal + Interest = Larger Principal

13 Pay the interest on unsubsidized loans PRIOR to capitalization!

14 HOW TO POSTPONE PAYMENTS

15 Grace Period - A period after graduation when payments are not required - Automatically granted on sub and unsub loans and Direct PLUS Loans disbursed on or after July 1, Interest does not accrue on subsidized loans - Sub and unsub loans 6 month period - Perkins loan 9 month period

16 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

17 Forbearance - A period when payments are not required - Must request from the lender/servicer - Interest accrues on sub and unsub loans - Many types (administrative, discretionary, mandatory)

18 REPAYMENT PLANS

19 Repayment Plans Standard Determines the payment amount and interest cost Extended Graduated Income Driven*

20 Standard Repayment Plan Monthly payment stays essentially the same throughout repayment 10 year repayment period Automatically selected if you don t choose another plan Advantages Considerations Typically yields the lowest overall loan cost Higher payment may be more difficult to manage if starting income is low BEST OPTION FOR: Borrowers whose primary goal is to minimize the repayment time period and the total interest cost of their loan debt

21 Extended Repayment Plan Allows up to 25-year repayment term Low monthly payment Total loans must be more then $30,000 Advantages Considerations Provides a lower monthly payment for the entire repayment term Longer repayment term typically results in higher overall interest costs BEST OPTION FOR: Borrowers who need long-term repayment relief

22 Graduated Repayment Plan Monthly payment adjusted at one or more predefined intervals Payment must cover accruing interest Number of intervals and frequency of adjustment can vary by lender Advantages Considerations Provides a low initial monthly payment Offers predictable payment increases Lower up-front payment may cause higher interest costs Review payment amounts for later tiers to ensure the payments will be affordable BEST OPTION FOR: Borrowers seeking short-term repayment relief from high loan payments but expect an increase in their income in the next few years

23 Income Driven Plans Income Contingent Income Based Income Sensitive (FFELP only) Pay As You Earn Monthly payments determined based on your annual income

24 Income Driven Plans Income Adjusted Gross Income Reported on your Tax Return Affordable Payment Protected Income Protected Income income protected for paying your most basic living expenses, based on the poverty guideline for your family size. Discretionary Income Discretionary Income The remainder of your income that is not protected income Affordable Payments A defined percentage of your discretionary income. Information obtained from

25 Comparing the Income-Driven Plans Eligibility PAYE IBR ICR Eligible Loans Direct Loans Direct & FFELP Direct Loans Must be a New Borrower Yes No No Partial Financial Hardship* Required Required Not Required Payment Formula Affordable Income 10% of disc. income 15% of disc. income 20% of disc. income Monthly Payment Limits Min: $0 Max: standard 10 yr Benefits Min: $0 Max: Standard 10 yr Min: $5 Max: Max Partial Interest Subsidy Yes (first 3 yrs) Yes (first 3 yrs) N/A Loan Forgiveness Remaining balance after 20 yrs Remaining balance after 25 yrs Remaining balance after 25 yrs *Partial Financial Hardship (PFH): You have a PFH if the calculated affordable payment is less than a standard 10-year payment. You must have a PFH to be accepted into PAYE & IBR. Information obtained from

26 What plan is right for you? Different individuals have different priorities! You may want to: Lower your monthly payments for a few years while you get your career on track Postpone payments temporarily while you are paying for relocation expenses after graduation Repay your loans as quickly and cheaply as possible Tie your monthly payments to your income so that you can take a lower paying but personally rewarding job Information obtained from

27 What plan is right for you? Student entering internship/residency with annual salary of $50,000 Loan Amount Salary Standard Extended Graduated ICR IBR PAE $50,000 $50,000 $574 $347 $282-$395 $508 $416 $277 $100,000 $50,000 $1,151 $694 $566 -$790 $647 $416 $277 $150,000 $50,000 $1,726 $1,041 $850-$1185 $647 $416 $277 $200,000 $50,000 $2,302 $1,388 $1133-$1588 $647 $416 $277 Student obtaining Pharm position with annual salary of $114,000 Loan Amount Salary Standard Extended Graduated ICR IBR PAE $50,000 $114,000 $574 $347 $282-$395 $677* NA NA $100,000 $114,000 $1,151 $694 $566 -$790 $1,355* NA NA $150,000 $114,000 $1,726 $1,041 $850-$1185 $1,714 $1,216 $810 $200,000 $114,000 $2,302 $1,388 $1133-$1588 $1,714 $1,216 $810 *Payment higher than Standard Repayment Plan based on 93 payments vs For borrowers with high salary who wish to pay the loan off sooner.

28 The lower the monthly payment, the higher the total interest cost!

29 What plan is right for you? Repayment Plan Loan Amount Monthly Payment Total Payments (Interest + Principal) Standard $50,000 $575 $69,048 Extended $50,000 $347 $104,112 Graduated $50,000 $283-$395 $112,770 ICR* $50,000 $508 $73,292 *Based on the $50k annual salary and 144 monthly payments. Repayment Plan Loan Amount Monthly Payment Total Payments (Interest + Principal) Standard $100,000 $1,151 $138,096 Extended $100,000 $694 $208,221 Graduated $100,000 $566-$790 $225,540 ICR* $100,000 $647 $170,821 **Based on the $50k annual salary and 188 monthly payments.

30 Payment Calculators direct.ed.gov studentaid.ed.gov

31 To reduce the cost of student loans make extra payments!

32 OTHER CONSIDERATIONS

33 Consolidation When a new loan pays off existing loans and carries new terms Interest rate becomes fixed Combines payments to multiple lenders/servicers into one payment

34 Should you consolidate? Probably a candidate when: Probably NOT a candidate when: You have multiple loan servicers You have non-direct Loans and you are interested in PSLF You want to lock-in your variable rate loans You have one loan servicer You have no interest in PSLF You are interested in PSLF but you have no non-direct Loans

35 Loan Forgiveness Public Service Loan Forgiveness Eligible loans Qualifying payments Qualifying work

36 Public Service Loan Forgiveness Eligible Loans - Federal Direct Sub and Unsubsidized Stafford - Federal Direct Consolidation - Federal Direct Grad PLUS - Federal Perkins

37 Public Service Loan Forgiveness Qualifying Payments 120 payments to Direct Loans made under - Income-Driven Plans (ICR, IBR & PAYE) - Standard 10-year Repayment While simultaneously working in public service

38 Public Service Loan 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 public service *Includes most medical schools and teaching hospitals

39 Private Loans Typically unsubsidized for life of loan A grace period/forbearance may be available Cannot be included in Income Driven Plans or PSLF Be cautious when consolidating private loans

40 Avoid Delinquency & Default Call your lender as soon as you know you are in trouble Federal Student Loans DO NOT qualify for bankruptcy Federal Student Loans are forgiven only in the case of death or permanent disability Always stay in touch with your lender, loan servicer, or collection agency.

41 Keep an Eye on your Credit Report Late payments, going over credit limits and having too many open accounts will lower your credit score Credit score affects your ability to borrow more, get housing or a job Protect your credit Free Credit Report

42 Useful Websites Loan Consolidation Your Loan Portfolio Repayment Plans Public Service Loan Forgiveness Student Loan Interest Deduction Loan Repayment Calculators Free Credit Report

43 Benjamin Franklin