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- Confidential Document, Property of Graduate Leverage, LLC - Dental Students’ Finances: A Strategic Approach to Debt Management *Detailed assumptions.

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Presentation on theme: "- Confidential Document, Property of Graduate Leverage, LLC - Dental Students’ Finances: A Strategic Approach to Debt Management *Detailed assumptions."— Presentation transcript:

1 - Confidential Document, Property of Graduate Leverage, LLC - Dental Students’ Finances: A Strategic Approach to Debt Management *Detailed assumptions are available upon request Andrew Franger ASDA Eastern Regional

2 - Confidential Document, Property of Graduate Leverage, LLC - Changes in Student Debt Levels Debt levels have more than tripled in the last 17 years ~$50k ~$115k ~$190K 2010 * Based on data collected by ADEA and GL internal student database

3 - Confidential Document, Property of Graduate Leverage, LLC -

4 Agenda 1. Regulatory & Market Update 2. Federal Loan Opportunities and Strategies 3. Private Loan Opportunities TWO PRIMARY OBJECTIVES: Maximize your Liquidity Lower the Cost of your Debt TWO PRIMARY OBJECTIVES: Maximize your Liquidity Lower the Cost of your Debt

5 - Confidential Document, Property of Graduate Leverage, LLC - Regulatory & Market Update New Income-Based Repayment (IBR) plan provides low payment and interest subsidies (July 1, 2009) Budget Control Act of 2011 eliminates Subsidized Stafford loans for graduate students (July 1, 2012) Improvements in private student loan markets may present opportunities for certain borrowers

6 *Based on borrowing $40,500 each year for 4 years of dental school. 10 Year Repayment term. Impact of Subsidy Removal Debt Ceiling Legislation (Budget Act 2011) resulted in the following changes: –After 2012 Graduate Students will not receive subsidized Stafford Loans –Eliminates on-time payment incentives (rebate) 2012 Grad 2013 Grad 2014 Grad 2015 Grad Grad Payment Increase (10 yr term) - $864 $2,527 $4,988 $ 8,248

7 - Confidential Document, Property of Graduate Leverage, LLC - Significantly Reduce Payments: Income-Based Repayment Plan (IBR): PARTIAL SUBSIDY Limits payment to 15% of discretionary income (changes to 10% in 2014*) Subsidized interest not covered by reduced payment is paid by government Subsidy limited to 3 years Extended Repayment Plans: NO SUBSIDY Consolidation 30 year Term Extended 25 year Term Payment Reduction Options Postpone Payments: In-School Deferment: FULL SUBSIDY Economic Hardship Deferment (EHD): FULL SUBSIDY Forbearance: NO SUBSIDY

8 - Confidential Document, Property of Graduate Leverage, LLC - Total Savings : 3 Scenarios, 3 Strategies Graduate A Graduate B Graduate C Best Approach: Payment: Salary: Tax Savings : $190,000 of debt. (weighted interest rate 7.05%) Liquidity, Tax Savings, & Subsidy Savings Based on current IBR Regulations as of July 1 st 2009 IBR EHD IBR $40,000 $90,000 $90,000 Subsidy Savings: $47 $0 $322 $2,296 $2,312 $1,706 $73 $0 $398 $2,369 $2,312 $2,104

9 - Confidential Document, Property of Graduate Leverage, LLC - Other Benefits of Reduced Payment Consolidation – 4.75% Fixed Stafford Loan – 6.8% LoansLoans Repayment Period Standard Repayment Private Loan % Grad PLUS – 8.5% 8 yrs10 yrs Effective Rate (APR) = 5.69% 10 yrs 4.75% Targeted Repayment Non-payment 9.25% 6.8% Non-payment 8.5% Non-pay 1/2 yrs1 yrs7 yrs Effective Rate (APR) = 6.29% $11,675 Structured Payment Strategy *Assumes $168,000 in federal debt and $8,000 in private loans

10 - Confidential Document, Property of Graduate Leverage, LLC - Should I Be Investing? % Average S&P Return (A/T) 7.4% Average S&P Return (A/T) 0% 8% 16% 1940 PLUS Loan S&P 500 Returns 8.1% Average PLUS Return 8.1% Average PLUS Return Sources: Yale Econ/Robert Shiller, Standard & Poor’s, Federal Reserve, Bloomberg All Returns Here Are After Tax

11 - Confidential Document, Property of Graduate Leverage, LLC - 7.9% (For Illustrative Purposes Only – assumptions based on good credit & sample lenders) Private Loan Market Update *Research conducted by GL % Historical Private Loans Index Margin 5.5% LIBOR, Prime, etc. Pre-Credit Crisis % Current Private Loan Market Has Improved Index Margin 4.9% Grad PLUS A Low Rate “Fixed” Option May Provide Significant Savings 3% Index Margin 10.9% During Credit Crisis Interest Rates Increase? Index 7.5% Margin ?

12 - Confidential Document, Property of Graduate Leverage, LLC - What every dental student with student loans should do: 1.Understand Your Debt a)What kind of loans do I have? (Federal Stafford, GRAD Plus, Perkins, etc.) b)Who is my lender? (Federal Direct, Federal through Private Lender, Non-Federal Private Lender) c)What are the interest rates on my loans? (fixed, variable, 6.8%, 7.9%, 8.5%, etc.) 2.Prepare & File Taxes Advantageously a)Preparation in fall of final year to understand tax implications for loan subsidy programs b)Understand the trade-off of filing jointly with spouse c)File taxes in final year as appropriate 3.Position Loans for Maximum Savings a)Subsidy: Income, tax status, family size, career path, loan portfolio, and application timing impact which program will provide greatest benefit b)Evaluate Refinancing opportunities c)Initiate evaluation and preparation prior to graduation 4.Allocate additional funds appropriately a)Only invest when returns exceed cost of debt and liquidity issues met b)Understand implications of retirement accounts on subsidy programs Dental Student Action Plan

13 - Confidential Document, Property of Graduate Leverage, LLC - within 1 week Support Process Personal Info Card Fill out Card Review Personalized Assessment Retain GL Advisor to Carry Out Process Complete Process Yourself Execute Debt Management Objectives GL Advisor Can Help Contact Info: Cell: Main: Overview We have compiled and analyzed your personal debt portfolio in order to determine the optimal debt management strategy. The tasks outlined below include each step required to minimize your cost of debt. Below your task list you will also find a detailing of the savings as well as your loan portfolio for your records. Required Tasks To Achieve Plan Objective: 1.November 15, 2010: Consolidate all low rate loans as initial in-school application 2.February 15, 2011: Complete Add-on Consolidation application form to include all low rate loans occurred in spring disbursement 3.March 1, 2011: Verify in-school deferment status on all consolidated loans to prevent payment and ensure subsidy 4.March 20, 2010: Complete tax filing process according to specific filing status: i) Non-Exempt: File using deductions for AGI to maximize subsidy and minimize


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