1. Money Management for Medical School Students For the Class of 2018 Nicole Knight, MBA AAMC Fall 2014 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of June 2014 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss the terms and conditions of the loans.

2. Agenda Student Loan Update The Repayment Timeline Borrowing Strategically Have a Spending Plan Understand and Protect Your Credit

3. ©2014 Association of American Medical Colleges. All rights reserved. “…Students must arrive at the door of the house of medicine with an enhanced awareness of how they will navigate the rising tide of medical education debt …” Refer to page iv

4. ©2014 Association of American Medical Colleges. All rights reserved. What M4’s wish they knew as M1’s… “Don't be scared, you will be okay” “Be frugal because every little bit adds up” “Budget very very wisely” “Don’t take out the max amount” Things They Wish They Knew

5. ©2014 Association of American Medical Colleges. All rights reserved. Is what YOU need to know now! “Doctors do not make as much money as you think, so manage your funds carefully” “Interest stinks” “It’s never too early to set financial goals” Going forward, have a plan! Things They Wish They Knew

6. ©2014 Association of American Medical Colleges. All rights reserved. “Can Medical Students Afford to Choose Primary Care? An Economic Analysis of Physician Education Debt Repayment” “Physician Education Debt and the Cost to Attend Medical School” www.aamc.org/FIRST

7. ©2014 Association of American Medical Colleges. All rights reserved. The FIRST Stop… www.aamc.org/FIRST Medloans ® Organizer and Calculator Refer to page 3

8. ©2014 Association of American Medical Colleges. All rights reserved. Class of 2013 Indebtedness 86% of class report having educational debt Source: AAMC 2013 Graduate Questionnaire (GQ) 63% report debt of $150,000 or higher $190,000$190,000 $168,000$168,000 PUBLIC PRIVATE Median MD School Debt: $175,000 Refer to page 1

9. ©2014 Association of American Medical Colleges. All rights reserved. Source(s): 2013 Graduation Questionnaire and 2013 LCME I-B data Education Debt Refer to page 1

10. ©2014 Association of American Medical Colleges. All rights reserved. The Details of Your Loans

11. ©2014 Association of American Medical Colleges. All rights reserved. Finding Your Federal Loans To access, provide: - SSN - Date of Birth - First 2 letters of last name - FAFSA PIN (www.pin.ed.gov) www.nslds.ed.gov Refer to page 4

12. ©2014 Association of American Medical Colleges. All rights reserved. STAFFORD LOAN STAFFORD LOAN During Medical School PERKINS LOAN* PERKINS LOAN* DIRECT PLUS LOAN * PCL and LDS Loans are also at a fixed 5% Interest Rates ( July ‘14 – June ‘15 ) Refer to page 9

13. ©2014 Association of American Medical Colleges. All rights reserved. STAFFORD LOAN STAFFORD LOAN During Medical School PERKINS LOAN* PERKINS LOAN* DIRECT PLUS LOAN * PCL and LDS Loans are also at a fixed 5% Interest Rates (Loans after 06/30/15) Refer to page 9

14. ©2014 Association of American Medical Colleges. All rights reserved. Subsidized vs. Unsubsidized Sub si dy [suhb-si-dee] noun - Financial assistance granted by the government to cover accruing interest while in-school, in grace, or in a qualifying deferment. Source: www.dictionary.com Refer to page 8

15. ©2014 Association of American Medical Colleges. All rights reserved. Subsidized vs. Unsubsidized Refer to page 8 Perkins* Primary Care Loans LDS Loans* Institutional Loans (some) Consolidation Loans (underlying subsidized loans) Unsubsidized Stafford Direct PLUS Private Loans Institutional Loans (some) Consolidation Loans (underlying unsubsidized loans) SubsidizedUnsubsidized *subsidy and deferment rights lost during consolidation

16. ©2014 Association of American Medical Colleges. All rights reserved. Capitalization Addition of unpaid interest to the principal Principal + Interest = Larger Principal Refer to page 10

17. Debt Management Tip Pay the interest on unsubsidized loans PRIOR to capitalization

18. ©2014 Association of American Medical Colleges. All rights reserved. A Peek at Repayment

19. ©2014 Association of American Medical Colleges. All rights reserved. Grace Periods Refer to page 19 The path for some loans

20. ©2014 Association of American Medical Colleges. All rights reserved. Grace Periods Refer to page 20

21. ©2014 Association of American Medical Colleges. All rights reserved. Options During Residency During residency, there are two choices: Postpone Payments Make Payments Deferment Forbearance Refer to page 22

22. ©2014 Association of American Medical Colleges. All rights reserved. Postponement Options NOTE: For more details, or to request a deferment or forbearance, contact the loan’s servicer. Must apply and qualify Interest is waived on subsidized loans Must request from servicer Interest accrues on all loans Medical Residency Forbearance available Deferment Forbearance Refer to pgs 22-23

23. ©2014 Association of American Medical Colleges. All rights reserved. Options During Residency During residency, there are two choices: Postpone Payments Make Payments Select a Repayment Plan Refer to pgs 25-30

24. ©2014 Association of American Medical Colleges. All rights reserved. Traditional $2,600 /mo $1,500 /mo $1,200 /mo Repayment Plans Monthly payments for the entire repayment term are calculated up-front and disclosed to you Refer to pgs 26-30

25. ©2014 Association of American Medical Colleges. All rights reserved. Monthly payments are based on your income and other factors. Payments are recalculated annually. Monthly payments are based on your income and other factors. Payments are recalculated annually. Income-Driven $660 /mo $420 /mo $280 /mo Repayment Plans * For new borrowers on or after July 1, 2014, the IBR monthly payment amount will resemble the PAYE monthly payment amount. Refer to pgs 26-30

26. ©2014 Association of American Medical Colleges. All rights reserved. Strategic Borrowing

27. ©2014 Association of American Medical Colleges. All rights reserved. Alternatives to Debt Scholarship s Refer to page 13 www.nhsc.hrsa.gov www.lrp.nih.gov www.aamc.org/stloan

28. ©2014 Association of American Medical Colleges. All rights reserved. Alternatives to Debt Scholarship s Support Refer to page 13

29. ©2014 Association of American Medical Colleges. All rights reserved. Alternatives to Debt Scholarship s Forgivenes s Support Refer to page 13 Public Service Loan Forgiveness (p 50)

30. ©2014 Association of American Medical Colleges. All rights reserved. Alternatives to Debt Scholarship s Forgivenes s Support Budgeting Refer to page 13

31. ©2014 Association of American Medical Colleges. All rights reserved. Free Money Perkins, PCL, LDS StaffordPLUS Private Loans or Credit Cards Borrow Wisely Refer to page 14

32. ©2014 Association of American Medical Colleges. All rights reserved. Borrow Wisely Private Monthly Payment Total Interest Total Cost 10 Years$760$49,100$89,100 PLUS Monthly Payment Total Interest Total Cost 10 Years$560$25,400$65,400 Stafford Monthly Payment Total Interest Total Cost 10 Years$530$21,000$61,000 Based on borrowing $40,000 (unsubsidized) with interest capitalizing after four years of medical school; based on interest rates of 6.21% (Stafford), 7.21% (Direct Plus), 12% (Private) and a 6-month grace period. Refer to page 15 Additional Cost +$4,400 Additional Cost +$28,100

33. ©2014 Association of American Medical Colleges. All rights reserved. How Will You Borrow? Refer to page 15

34. ©2014 Association of American Medical Colleges. All rights reserved. How Will You Borrow? Do NOT borrow just because you are eligible Borrow what you need, not what you want Decline loans that exceed your need Accepting loans may affect eligibility for other aid Avoid forfeiting low rate loans for higher rate debt Refer to page 15

35. Financial Aid Fact If a shortfall occurs, previously declined monies may be obtained – see financial aid for assistance

36. ©2014 Association of American Medical Colleges. All rights reserved. Living on Borrowed Money M1 Gets Delivery Pizza (+ tip)... $25.00 After 4 Years of School…….… $32.00 After 4 Years of Residency…... $41.00 10-Year Repayment Term…….. $55.00+ 25-Year Repayment Term…….. $84.00+ OR The Total Cost 6.21%

37. ©2014 Association of American Medical Colleges. All rights reserved. Have a Spending Plan

38. ©2014 Association of American Medical Colleges. All rights reserved. Have a Spending Plan A Spending Plan in 1-2-3 1) Put it in writing 2) Review periodically to identify leaks 3) Make necessary adjustments “Live like a student while you are a student…” Refer to page 41

39. ©2014 Association of American Medical Colleges. All rights reserved. Have a Spending Plan www.aamc.org/FIRST Refer to page 44

40. ©2014 Association of American Medical Colleges. All rights reserved. Have a Spending Plan www.mint.com Refer to page 44

41. ©2014 Association of American Medical Colleges. All rights reserved. The Basics of Budgeting Refer to page 41 Your Total Income Your Total Expenses = Your Discretionary Income

42. ©2014 Association of American Medical Colleges. All rights reserved. The Basics of Budgeting UNLOCKS DEEPER INSIGHT INTO YOUR BUDGET

43. ©2014 Association of American Medical Colleges. All rights reserved. If Discretionary Income is “Significant” Ask Yourself 2 Questions 1. Were you honest about your expenses? 2. Do you have enough to start a ‘Nest Egg’? ‘Yes’ and ‘Yes’ Consider sending it back, Or borrow less next semester The Basics of Budgeting

44. ©2014 Association of American Medical Colleges. All rights reserved. If Discretionary Income is a Negative Number Ask Yourself 2 Questions 1. Are you budgeting for ‘Needs’ or ‘Wants’? 2. What alternatives might there be? Congratulations… The purpose of your budget is served! Review expenses and make adjustments. The Basics of Budgeting

45. ©2014 Association of American Medical Colleges. All rights reserved. Spending Wants: Leaks Small amounts add up over time It may not seem like much in the short term GOURMET $5/day, 5 days/week $100/month, 10 months $1,000/year = $4,000

46. ©2014 Association of American Medical Colleges. All rights reserved. Spending Wants: Leaks $4,000 spent during medical school = GOURMET After graduation, grace and 4-yr residency w forbearance @ 5.41% = ~$7,000, then paid 10 yr Term = ~$9K 25 yr Term = ~$13K Rounded Estimates

47. ©2014 Association of American Medical Colleges. All rights reserved. Spending Wants: Leaks Consider the alternatives Savings can also add up quickly AT HOME $10/month 10 months/year $100/year $400

48. ©2014 Association of American Medical Colleges. All rights reserved. $400 spent during medical school = AT HOME After graduation, grace and 4-yr residency w forbearance @ 5.41% = ~$550, then paid 10-yr Term = ~$700 25-yr Term = ~$1,000 Spending Wants: Leaks Rounded Estimates

49. Are Credit Cards Bad?

50. ©2014 Association of American Medical Colleges. All rights reserved. Credit Cards Reasons to have a Credit Card Builds Credit Emergencies Consumer Protection Convenience Refer to page 38

51. ©2014 Association of American Medical Colleges. All rights reserved. Credit Cards The DON’Ts of Credit Cards Don’t use them for cash advances Don’t charge more than you can pay in a month Don’t use one card to pay off another Refer to page 39 TIP: If you can eat, drink or wear an item, it’s usually not a good use of credit.

52. ©2014 Association of American Medical Colleges. All rights reserved. 22.75 years to repay in full $12,000 in total repayment cost What could possibly be worth paying more than twice its original value? The Minimum Payment Trap Source: BankRate.com $5,000 balance with an 18% interest rate (Making minimum monthly payments) Refer to page 43

53. ©2014 Association of American Medical Colleges. All rights reserved. Credit: Understand & Protect

54. ©2014 Association of American Medical Colleges. All rights reserved. 35 % 30 % 15 % 10 % Payment history Amount owed Length of history New credit Type of credit A FICO Score is Based On … Refer to page 38

55. ©2014 Association of American Medical Colleges. All rights reserved. How to Improve Your Score During medical school, be sure to: Pay bills on time Pay down debt on lines of credit Apply for credit sparingly Refer to page 37

56. ©2014 Association of American Medical Colleges. All rights reserved. Refer to page 39 Check your Credit Report www.annualcreditreport.com

57. “An investment in knowledge always pays the best interest” - Benjamin Franklin

58. Questions? FIRST@aamc.org Follow us on Twitter: @AAMCFIRST Like us on Facebook: Facebook.com/AAMCFIRST