Student Loans and Debt Management

Why am I here? Student Loans and Debt Management Exit Interview Nicole Knight, MBA AAMC Spring 2015 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2015 and are subject to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options. Oh, that s why! Agenda Know Your Loan Portfolio How to Postpone s s During Residency Other Considerations Have a Spending Plan Refer to page 40 Have a Spending Plan Refer to pages 37-40 www.aamc.org/first www.mint.com 1

Class of 2014 Indebtedness Refer to page 1 Median MD School Debt: $180,000 Know Your Loan Portfolio PUBLIC $170,000000 PRIVATE $200,000 Source: AAMC 2014 Graduate Questionnaire (GQ) 84% of Got class Private report having Loan educational Debt? debt 43% report see debt pages of $200,000 53 & 54or higher Class of 2014 Indebtedness Refer to page 1 Finding Your Federal Loans Refer to page 4 East Tennessee COM Median Education Debt Education Debt $175,000 Non-Education Debt (avg) $ 8,000 Refer to page 54 To access, provide: SSN Date of birth First 2 letters of last name FAFSA PIN or FSA ID Source(s): 2014 Graduation Questionnaire and LCME I-B data, 87% w medical debt. 25% w premed debt (GQ survey) www.nslds.ed.gov Subsidized Versus Unsubsidized Refer to page 10 During Medical School Refer to pages 11-12 Direct Subsidized Perkins* Primary Care Loans Loans for Disadvantaged Students* Institutional Loans (some) Consolidation Loans (underlyng subsidized loans) Subsidized Direct Unsubsidized Direct PLUS Private Loans Institutional Loans (some) Consolidation Loans (underlying unsubsidized loans) Unsubsidized Interest Rates PERKINS LOAN* STAFFORD LOAN DIRECT PLUS LOAN * subsidy and deferment rights lost during consolidation * PCL Loans and LDS Loans are also at a fixed 5% 2

During Medical School During Medical School Refer to pages 11-12 Refer to pages 11-12 Interest Rates ( 13-14 LOANS) PERKINS LOAN* STAFFORD LOAN DIRECT PLUS LOAN Interest Rates ( 14-15 LOANS) PERKINS LOAN* STAFFORD LOAN DIRECT PLUS LOAN * PCL Loans and LDS Loans are also at a fixed 5% * PCL Loans and LDS Loans are also at a fixed 5% Capitalization Refer to page 13 Addition of unpaid interest to the principal Repayment Strategy Voluntary s 1) Send as a Separate - w/ Instructions to APPLY NOW - and Specify the Loan to Apply it to (high rates are the priority) 2) Follow-up to Verify it was done Principal + Interest = Larger Principal Pay the interest on your loans - before they capitalize! Grace Refer to pages 15-16 After Graduation 3

Options During Residency Postponement Options Refer to page 17 Deferment Not Pay Pay Must apply and qualify Interest is waived on subsidized loans Unsubsidized loans continue to accrue interest Qualification requirements are typically STRICT NOTE: For more details, or to request a deferment or forbearance, contact your servicer. Postponement Options Refer to page 18 Forbearance Medical Residency Forbearance Postpones payments in annual increments Interest accrues on all loans Capitalization at the end of residency (if increments requested back-to-back throughout) Request the following increment 30-days before it is needed Dr. Median s situation after a 4-year residency Balance after Grace Residency Interest Post- Residency Balance TOTAL $202K + $46K = $248K NOTE: For more details, or to request a deferment or forbearance, contact your servicer. Based on a 2015 graduate indebtedness of $175,000 (numbers are rounded). Forbearance Debt Fact Dr. Median s repayment of $248K after residency: Plank Yrs. Monthly Interest Repayment Standard 10 $2,4800 $161K $336K Extended 25 $1,700 $320K $495K The lower the monthly payment, the higher the interest cost Based on a 2015 graduate indebtedness of $175,000 (numbers are rounded). 4

Loan Repayment Refer to pages 28-29 s During Residency Repayment Plans Refer to pages 20-25 Repayment Plans Refer to pages 20-25 Traditional Income-Driven Standard Monthly payments for the entire repayment term are calculated Extendedup-front and disclosed to you. $2,300/mo $1,350/mo $670/mo $430/mo Income-Contingent Repayment (ICR) Monthly payments are based on your income Income-Based and other factors Repayment - (IBR)* recalculated annually. Graduated Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one. $1,100/mo Pay As You Earn (PAYE) $290/mo Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one. * New Borrowers on or after July 1, 2014 that select IBR will receive payment amounts equal to that of PAYE. What s the Catch? IBR & PAYE Eligibility Refer to page 22 Partial Financial Hardship (PFH) Standard $2,300 / mo > $430 PAYE (IBR) or or IBR $290 (PAYE) Must have PFH to enter into IBR or PAYE Can remain in IBR or PAYE in subsequent years, even without a PFH Must submit annual documentation Max payment in IBR or PAYE is the Standard amount (determined when entering the plan) Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one. 5

PAYE Eligibility Refer to page 24 Benefits Over Postponing Additional requirements No outstanding loans on October 1, 2007 (or paid-off all outstanding loans before receiving a new loan on or after 10/1/07) AND Received a Direct Loan disbursement on/after October 1, 2011 IBR Low s Partial Subsidy ($1,000) A maximum payment Forgiveness (PSLF or 25-Year Term) Delayed capitalization PAYE Low payments Partial subsidy ($1,300) A maximum payment Forgiveness PSLF or 20-Year Term Limited and delayed capitalization To Enter PAYE or IBR Possible Path Into To Enter PAYE or IBR Show a Apply w/ Partial Each TIP: Consolidation Financial Servicer may be needed Hardship to make some Provide loans eligible Give (i.e. Perkins) Family Size (annually) Access to Tax Records Why? To get a low or zero payment for 12 months Why NOT? If goal is to minimize overall cost don t seek low payments Now: File 2014 Taxes Allows for smooth transition into an IDR plan if no significant change occurs Why? To skip grace and begin process to forgiveness Why NOT? You will be giving up the chance to ever pay strategically Immediately After Graduation: Consolidate all loans TIP Indicate IBR or PAYE, and immediately submit the IDR application to your selected servicer Why? To formally document your pursuit of PSLF July: Submit ECF to FedLoan Servicing TIP - Skip this if you are not seeking PSLF or term forgiveness with IBR or PAYE Why? To accurately update payment amounts Next Year: Provide current income & family size TIP - Respond promptly when requested by your servicer After Residency After Resident w $300K Indebtedness $229K Dr. Median s Post-Residency balance: $237K Dr. Median s Post-Residency balance: $429K $422K Plan Yrs Monthly PAYE 15 $1,800-2,300 Interest Repayment* Forgiven $208K $383K $0K IBR 12 $2,300 $176K $351K $0K Plan Yrs Monthly PAYE 16 $1,800-2,700 IBR 19 $2,600 - $4,000 Interest Repayment* Forgiven $433K $433K $391K $463K $763K $0K *starting salary $200,000. Based on a 2015 graduate indebtedness of $175,000 and a 4-year residency.. (A PFH exists 0 years after residency (in IBR) and 5 years post residency in PAYE plan) *starting salary $200,000. (A PFH exists 16 years after residency ends in both IBR and the PAYE plan) 6

The FIRST Stop Refer to page 3 A tool for graduates!! Medloans Organizer and Calculator The FIRST Stop Using NSLDS & the Medloans Organizer and Calculator Select this Button Export your loans www.aamc.org/first So, What s The Best Strategy? Forbearance IBR or PAYE Ease and Flexibility Minimize Other Considerations Voluntary and Aggressive s Minimize Debt Free Money NHSC, PSLF, PAYE, or IBR Loan Forgiveness (PSLF) Refer to pages 45-46 + + Eligible Loans Qualifying s Qualifying Work Public Service Loan Forgiveness Dr Median and PSLF Dr. Median pursues Public Service: Pediatrician at a community health center IBR for 10 years (3yr. residency + 7yrs. after) Has PFH for all 10 years Qualifies for Public Service Loan Forgiveness 7

Loan Forgiveness (PSLF) Loan Forgiveness (PSLF) Refer to pages 45-46 Dr. Median s loans after 10 years of public service: Want to know more? Paid (IBR)...$160K* Forgiven (IBR)...$165K Paid (PAYE)...$107K* Forgiven (PAYE)...$223K *starting salary &130,000. www.aamc.org/first Repayment Assistance Should You Consolidate? Information on other programs: Refer to pages 50-51 aamc.org/stloan lrp.nih.gov nhsc.hrsa.gov AAMC National Institutes of Health (NIH) National Health Service Corps (NHSC) Are There Any Tax Benefits? Refer to page 52 The Next Steps Refer to page 55 Full Deduction Single $65,000 or less Married filing Jointly $130,000 or less Partial Deduction $65,001 to $80,000 $130,001 to $160,000 NO Deduction $80,001 or more $160,001 or more Limited to: First 60 months of repayment Max student loan interest deduction: $2,500/year May be eligible: Voluntary payments & capitalization www.irs.gov/publications/p970 8

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