Loan Analysis for Thomas Jefferson. Prepared by Prime Student Loan, LLC

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2 Welcome Dear Thomas, Thanks for signing up with Prime Student Loan, LLC (PSL)! We are excited to help lower your monthly loan payments. We view lower payments as part of a three step process to optimizing your finances: (1) (2) (3) Know your loans. Understand their types, principal amounts, and interest rates. Learn how these parameters affect your monthly payments and the interest you owe. Lower your payments. Most people can lower their monthly payments by refinancing private loans and enrolling in alternative repayment plans for government loans. Refinancing private loans has the added benefit of lowering their interest rates. Allocate your money. By minimizing monthly loan payments, you maximize your discretionary income. Your ultimate goal should be to decide how best to spend that money. That may mean saving, investing, or paying down high interest debt like credit card debt. At PSL we are loan experts. We are here to help you with parts (1) and (2), understanding your loans and lowering your payments. But we want to get you thinking about how to allocate your money as well. The Loan Analysis report is a comprehensive introduction to your loans and potential repayment strategies. In addition to the background, explanation, and analysis included in the report itself, links to outside sources are provided wherever possible to help you augment your understanding of student loans and to diligence our suggestions. It is our hope that the report will illuminate a path to optimized loan payments and efficient allocation of discretionary income. Happy reading, Derek Kaknes Founder and CEO Prime Student Loan, LLC ONE Marina Park Drive, 14th Floor Boston, MA

3 Contents Welcome Analysis and Recommendations Benefits of Consolidation and Refinancing Overview Current Loan Portfolio Repayment Analysis Implementing PSL Recommendations Budget Analysis Disclaimer Appendix Repayment Schedule A As a resident making $45k a year my student loans were literally unmanageable. I knew programs existed to alleviate some of the debt burden for people in my situation. I reached out to Prime Student Loan to see what they could do. They helped me consolidate my federal loans, enroll into an income based repayment plan and refinance my loans from Sallie Mae. I now pay more than $1,000 less than I did two months ago. -M.D. '12 3

4 Benefits of Consolidation and Refinancing Sometimes repaying your loans early is the best option, but for many borrowers there are alternatives that need consideration. Lower Your Interest Rates Do you have private loans? Then be sure to input them into your account so we can prequalify you for reduced rates. Maximize Your 401(k) Do you have a 401(k) or other retirement account? Then you have the opportunity to invest up to $17,500 each year before taxes, and some employers will even match a portion of that contribution. Were you able to maximize your contribution to eligible retirement accounts last year? If not, then lowering payments through refinancing may be an appropriate way to capitalize on your pre-tax investment opportunity. Qualify for a Mortgage Are you looking to purchase an apartment, condominium or house in the next ten years? If so, then lowering your mandatory monthly payments can help you qualify for a government mortgage. Borrowing limits for government mortgages are dictated by your debt-to-income ratio, or DTI. You can lower your DTI by lowering your mandatory monthly payments and thus qualify for more attractive mortgage options. 1 Save for a Down Payment Even if you have sterling credit, you still need a cash down payment in order to purchase real estate in the post financial crisis age. If you forego savings in order to repay existing student loans, then you lose the ability to put that cash towards other uses, like investing in a house. Improve your FICO Just like government mortgages, FICO uses DTI as a metric in determining its ratings. That means that borrowers can incrementally improve their credit rating by lowering their mandatory payments and maximizing their financial flexibility. Repay Higher Interest Loans Do you have credit card or other forms of consumer debt with elevated interest rates? Student loans are often the lowest cost debt in consumer portfolios, so by minimizing your payments you can refocus your income on repaying your highest interest loans first and save money in the long run. 1 See the PSL blog post at for a detailed discussion of student loan debt and DTI. 4

5 Overview At Prime Student Loan, LLC (PSL) our goal is to help you properly manage student loan debt. The first step in this process is minimizing your monthly payments. If you are in a hurry, this Overview highlights the most important findings from our loan analysis. Current Loan Portfolio According to the information provided in your PSL account, you have a total of $128,375 in loans comprising $27,356 in private loans and $101,019 in federal loans. Your average interest rate is 6.4%. We estimate your monthly payment is $1,453. See Table 1 (page 6) for your current loan information. Optimized Monthly Payment By consolidating and extending the terms of your federal loans and refinancing eligible private loans, your monthly payment could be reduced to as little as $802, a 44.8% reduction (Figure 1). That means an increase in discretionary income of $651 per month or $7,807 per year. By investing that money at an annual return of 6%, your investment account could contain $106,223 after 10 years of repayment. That number could be even higher if your company matches retirement investments. The analysis here and throughout the Loan Analysis document is based on the information provided in your PSL account. We ask that you review the information to ensure its accuracy and to make sure all loan information is included. Private loan information is particularly important, because PSL may be able to lower both monthly payments and interest rates on your private loans. Realizing Your Payment Strategy In order to achieve your optimized monthly payment, you will need to perform the following: Private Loan Refinancing. We recommend you refinance the following private loans: 1015, In addition to reducing your monthly payments, we may be able to lower the interest rates on these loans. The process only takes minutes. Visit the following link to begin refinancing immediately: Federal Loan Consolidation and Term Extension. We recommend you consolidate the following federal loans to the maximum term: 1011, 1012, 1013, 1014, Visit to begin the consolidation process. Even if your loans have been consolidated, make sure the terms have been extended maximally! Consolidated Current $802 Monthly Payment Reduction $ Monthly Payment ($) 5 Figure 1 Monthly payment reduction. Monthly payments were calculated under various repayment conditions. Current refers to the estimated monthly payment under your current repayment strategy as determined from your online PSL account. Consolidated refers to your payment after consolidation and term extension of federal loans and refinancing of eligible private loans.

6 Current Loan Portfolio The loan information in your PSL account is summarized in Table 1. 2 You have a total of $128,375 in student loans including $27,356 in private loans and $101,019 in federal loans. 3 To understand how your loan characteristics compare to other borrowers, we calculated your principal, interest rate, and monthly payment percentiles based on borrowers in the PSL database. Private Loan Statistics Your $27,356 in private loans have a weighted average interest rate of 8.6% and a monthly payment of $340. The average principal for private borrowers is $54,408. Your $27,356 principal falls in the 34th percentile. The average interest rate for private borrowers is 6.0%. Your 8.6% interest rate falls in the 85th percentile. The average monthly payment for private borrowers is $420. Your $340 monthly payment falls in the 48th percentile. Federal Loan Statistics Your $101,019 in federal loans have a weighted average interest rate of 5.8% and a monthly payment of $1,113. The average principal for federal borrowers is $79,465. Your $101,019 principal falls in the 72nd percentile. The average interest rate for federal borrowers is 6.8%. Your 5.8% interest rate falls in the 22nd percentile. The average monthly payment for federal borrowers is $919. Your $1,113 monthly payment falls in the 69th percentile. Table 1 Current Loan Portfolio Loan ID Loan Name Amount Rate Term Monthly Private 1015 Signature Student Loan $14, $ Signature Student Loan $12, $152 Subtotal $27, $340 Federal 1011 DIRECT PLUS $17, $ DIRECT PLUS $35, $ FEDERAL PERKINS $10, $ DIRECT STAFFORD UNSUBSIDIZED $15, $ FEDERAL PERKINS $22, $225 Subtotal $101, $1,113 Total $128, $1,453 2 Table 1 data come from the information provided in your PSL account. Table I shows the characteristics of your loans under your current repayment strategy in the absence of PSL recommendations. Maturity is given in months. Maturity and Monthly are calculated as described in Disclaimer section. 3 Visit the federal student aid site at for a comparison of federal and private loans. 6

7 Aggregate Loan Statistics Your $128,375 in student loans have a weighted average interest rate of 6.4% and a monthly payment of $1,453. The average principal for student borrowers is $94,172. Your $128,375 principal falls in the 75th percentile. The average interest rate for student borrowers is 6.6%. Your 6.4% interest rate falls in the 43rd percentile. The average monthly payment for student borrowers is $1,021. Your $1,453 monthly payment falls in the 81st percentile. 7

8 Loan Analysis Now that you have been introduced to your loans, it is time to start optimizing your repayment plan. At PSL that means lowering your monthly payments. Private Loan Repayment Since private loans are issued at competetive interest rates, they can be refinanced. As an employed graduate, you are a much safer credit risk than you were as a student. You are now a Prime borrower, and your achievements should garner a lower interest rate. PSL may be able to reduce the weighted average interest rate on your private loans from 8.6% to 5.4%. 4 Combined with term extension, refinancing may reduce your monthly private payment from $340 to $223, increasing annual discretionary income by $1,412. Federal Loan Repayment Because federal loan interest rates are low and fixed, they are difficult to refinance. However, the government offers a number of different repayment plans that can lower monthly payments. 5 Based on your aggregate federal principal ($101,019), you may be able to lower your monthly federal payment from $1,113 to $580, increasing annual discretionary income by $6,396, by extending your federal terms from 10 to 30 years. While it lowers your monthly payment, extending your loan term means you may pay more in interest over the lifetime of the loan. It turns out that is okay, because lowering your payments allows you to spend that extra discretionary income where it is most beneficial. For example, you could invest it or use it to pay off higher interest rate loans. Furthermore, if repaying your student loans really is the best use of your money, there is no penalty for accelerating loan payments. Aggregate Loan Repayment By consolidating and extending the terms of your federal loans and refinancing eligible private loans, you may be able to cut your monthly payment from $1,453 to $802, increasing your discretionary income by $651 a month or $7,807 a year (Figure 2). At an annual return of 6%, your investment account may accrue $106,223 over 10 years of repayment. Effect of Repayment Strategy on Monthly Payment Monthly Payment ($) Figure 2 Effect of Repayment Strategy on Monthly Payment. Monthly payments were calculated under various repayment conditions. Current refers to the estimated monthly payment under your current repayment strategy as determined from your online PSL account. Consolidated refers to your payment after consolidation and term extension of federal loans and refinancing of eligible private loans. Private Federal 0 Current Consolidated Repayment Strategy 4 Your exact interest rate will vary depending on information specific to your refinancing application. 5 See the government direct loan program site at for an overview of potential repayment plans. 8

9 Implementing PSL Recommendations Now that you know how to lower your payments, take a few minutes to do it! Private Loan Refinancing We recommend you refinance loans 1015, 1016 (Table 1). Visit the following link to begin refinancing your private loans now: Remember, refinancing private loans can lower your interest rate and your monthly payments. And it only takes minutes. Federal Loan Consolidation We recommend you consolidate and extend the terms of loans 1011, 1012, 1013, 1014, 1018 (Table 1). If you have already consolidated, check to make sure your loan terms have been extended maximally. To begin consolidating your federal loans now, visit Click on the Borrower Services link and sign in. 9

10 Budget Analysis Lower student payments mean more discretionary income. Let us look at how your optimized repayment plan affects your budget (Table 2) 6. Given an estimated annual income of $150,000, we calculate your tax expense to be $33,585. That leaves $116,415 to split between loan payments and discretionary income. Based on the suggestions in the Loan Analysis section, we believe you can increase your discretionary income by as much as $7,807 annually. That money can be saved, used to max out your 401k contribution, invested, or used to pay down high interest debt. Furthermore, you retain the abilitiy to allocated that extra discretionary income as you see fit. Lowering your monthly payment also has a positive effect on your debt to income ratio (DTI), reducing it from 25/37 to 25/31. 7 DTI is a common factor used in mortgage underwriting and credit scoring. Improving your DTI can make it easier to buy a house or secure other kinds of consumer credit. It can help you obtain lower interest rates on future loans as well. Table 2 Estimated Budget Current Consolidated Annual Monthly Annual Monthly Gross Income $150,000 $12,500 $150,000 $12,500 Less: Student Loan Interest ($0) ($0) ($0) ($0) Less: 401k Contribution ($0) ($0) ($0) ($0) Adjusted Gross Income $150,000 $12,500 $150,000 $12,500 Less: Standard Deduction ($6,100) ($508) ($6,100) ($508) Taxable Income $143,900 $11,992 $143,900 $11,992 Less: Taxes ($33,585) ($2,799) ($33,585) ($2,799) Net Taxable Income $110,315 $9,193 $110,315 $9,193 Plus: Deductions $6,100 $508 $6,100 $508 Plus: Student Loan Interest $0 $0 $0 $0 Free Cash Flow $116,415 $9,701 $116,415 $9,701 Student Loan Payment $17,434 $1,453 $9,627 $802 % of FCF 15.0% 15.0% 8.3% 8.3% Net FCF for Expenses $98,981 $8,248 $106,788 $8,899 Less: Rent $37,500 $3,125 $37,500 $3,125 Net FCF After Rent $61,481 $5,123 $69,288 $5,774 Rent as % of Net FCF 37.9% 37.9% 37.9% 35.1% Loan as % of FCF After Rent 22.1% 22.1% 12.2% 12.2% DTI Calculation Obligations Rent $37,500 $3,125 $37,500 $3,125 Student Loans $17,434 $1,453 $9,627 $802 Total $54,934 $4,578 $47,127 $3,927 Front Ratio (Rent/Income) 25.0% 25.0% 25.0% 25.0% Back Ratio (Total/Income) 36.6% 36.6% 31.4% 31.4% DTI Ratio (Front/Back) 25/37 25/37 25/31 25/31 6 Table 2 shows the effect of optimized repayment on your estimated budget. All Table 2 calculations are are based on your annual income. If you have not entered annual income into your PSL account, please do so as soon as possible. Upon doing so we will generate a new report free of charge with an updated budget. 7 DTIs are estimates based on the information in Table 2. For more information on DTI calculation, visit 10

11 Disclaimer Prime Student Loan, LLC (PSL) has generated this personalized Loan Analysis document for your use only. This report is based on the information in your PSL account, and it is only as accurate as the information provided therein. The analysis and recommendations contained in this Loan Analysis document represent the insight and opinions of PSL and do not constitute investment advice. This document does not necessarily contain exhaustive analysis of all potially beneficial repayment plans. There may be other repayment strategies, like Federal loan forgiveness programs or programs specific to your private lenders, which could reduce your debt burden or monthly payments further. As always it is your obligation to diligence PSL suggestions before altering your repayment strategy or finances in general. Assumptions Unless otherwise designated in your PSL account, the following assumptions have been made in order to determine your optimized repayment strategy. Federal loan terms are ten years. Interest rates on private and federal loans are floating and fixed, respectively Loans for which no interest rate is available are assigned an annual interest rate of 7.9%. Loans that are not recognized as federal are private. Annual income (if not specified) is $60,000. The following assumptions are made as a matter of course when determining your optimized repayment strategy. The term of refinanced private loans is fifteen years, while the term of consolidated federal loans depends on outstanding principal. Interest rates after consolidation of federal loans incorporate the 0.25% interest rate reduction obtained when the borrower signs up for automatic electronic payments. The interest rate quoted for private loan refinancing corresponds to the rate obtainable by a borrower with a cosigner and a combined income in excess of total debt. The rate quoted is floating, LIBOR + 5.3% or roughly 5.4%. Note that private loan refinancing rates are subject to further credit diligence. All borrowers take the standard deduction ($6,100 for 2013) for tax purposes. Total tax burden is determined according to 2013 tax brackets and assume taxpayer is filing as an individual. The poverty line (for IBR calculations) is $11,170 in the State in which the borrower resides. Savings rates and investment rates are assumed to be 0.25% and 6% annually, respectively. Thank you for signing up with PSL. Please contact us with questions at info@primestudentloan.com. 11

12 Appendix A: Repayment Schedule Year Current Beginning Balance $128,375 $118,874 $108,761 $97,993 $86,525 $74,308 $61,289 $47,412 $32,616 $16,835 Plus: Interest $7,933 $7,321 $6,666 $5,966 $5,217 $4,415 $3,557 $2,638 $1,654 $599 Less: Payment ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) ($17,434) Ending Balance $118,874 $108,761 $97,993 $86,525 $74,308 $61,289 $47,412 $32,616 $16,835 $-0 Interest Rate 6.4% 6.4% 6.4% 6.4% 6.4% 6.4% 6.5% 6.5% 6.5% 6.5% Monthly Payment $1,453 $1,453 $1,453 $1,453 $1,453 $1,453 $1,453 $1,453 $1,453 $1,453 Optimized Beginning Balance $128,375 $125,780 $123,044 $120,158 $117,114 $113,903 $110,515 $106,941 $103,169 $99,189 $94,988 $90,553 $85,872 $80,931 Plus: Interest $7,032 $6,890 $6,741 $6,583 $6,416 $6,239 $6,052 $5,855 $5,646 $5,426 $5,192 $4,946 $4,685 $4,409 Less: Payment ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) ($9,627) Ending Balance $125,780 $123,044 $120,158 $117,114 $113,903 $110,515 $106,941 $103,169 $99,189 $94,988 $90,553 $85,872 $80,931 $75,713 Interest Rate 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% Monthly Payment $802 $802 $802 $802 $802 $802 $802 $802 $802 $802 $802 $802 $802 $802 Accrued Discretionary Saved $7,818 $15,656 $23,513 $31,390 $39,286 $47,202 $55,138 $63,094 $71,070 $79,066 $69,624 $60,158 $50,669 $41,156 Invested $8,059 $16,601 $25,656 $35,255 $45,429 $56,214 $67,645 $79,763 $92,608 $106,223 $102,660 $98,883 $94,879 $90,635 A-1

13 Appendix A: Repayment Schedule Year Current Beginning Balance Plus: Interest Less: Payment Ending Balance Interest Rate Monthly Payment Optimized Beginning Balance $75,713 $70,203 $67,124 $63,871 $60,434 $56,801 $52,962 $48,902 $44,610 $40,071 $35,270 $30,192 $24,818 $19,132 Plus: Interest $4,117 $3,876 $3,702 $3,518 $3,322 $3,115 $2,896 $2,663 $2,416 $2,154 $1,876 $1,581 $1,269 $937 Less: Payment ($9,627) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) ($6,955) Ending Balance $70,203 $67,124 $63,871 $60,434 $56,801 $52,962 $48,902 $44,610 $40,071 $35,270 $30,192 $24,818 $19,132 $13,114 Interest Rate 5.6% 5.6% 5.6% 5.6% 5.6% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% Monthly Payment $802 $580 $580 $580 $580 $580 $580 $580 $580 $580 $580 $580 $580 $580 Accrued Discretionary Saved $31,619 $24,734 $17,831 $10,912 $3,975 $-2,979 $-9,951 $-16,940 $-23,947 $-30,971 $-38,013 $-45,072 $-52,149 $-59,243 Invested $86,137 $84,126 $81,995 $79,735 $77,341 $74,802 $72,112 $69,259 $66,236 $63,032 $59,635 $56,034 $52,217 $48,171 A-2

14 Appendix A: Repayment Schedule Year Current Beginning Balance Plus: Interest Less: Payment Ending Balance Interest Rate Monthly Payment Optimized Beginning Balance $13,114 $6,744 Plus: Interest $585 $211 Less: Payment ($6,955) ($6,955) Ending Balance $6,744 $-0 Interest Rate 5.7% 5.7% Monthly Payment $580 $580 Accrued Discretionary Saved $-66,356 $-73,486 Invested $43,883 $39,337 A-3