UCSD Health Sciences Financial Aid Ana Nastich Financial Aid Counselor STUDENT LOAN MANAGEMENT & REPAYMENT Strategies

Educational debt Private* $133,894 Public* $98,605 UCSD $101,873 * Per American Association of Colleges of Pharmacy – Pharmacy Graduating Student Survey 2011 Please note: 2011 UCSD Average Indebtedness was $86k Average Indebtedness - Class of 2012

Pharmacist national wages Top paying industries Top paying states IndustryAnnual average Pharmaceutical Manufacturing $125,480 General Retail Stores $118,630 Scientific Consulting $118,490 Offices of Physicians $117,750 Outpatient Care Centers $117,510 StateAnnual Average Alaska$125,330 Maine$125,310 California$122,800 Vermont$122,490 Alabama$119,810 *Per U.S. Bureau of Labor Statistics - Occupational Employment Statistics Average Pharmacist salary is $112,160

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

KNOW YOUR LOAN PORTFOLIO

Finding your Federal Loans

Knowing your servicer NamePhone numberWebsite Direct Loan Servicing(800) www.dl.ed.gov Great Lakes(800) www.mygreatlakes.org NelNet(888) www.nelnet.com SallieMae(800) www.saliemae.com PHEAA(800) www.myfedloan.gov ACS**(800) www.acs-education.com **For Perkins and HPSL Loans Only!

Interest Rates Stafford & Direct Loans 6.8% 6.8% (disbursed on or after 7/1/06) Fixed Fixed Stafford Loans* 1.88% 2.48% (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 Fixed rate - based on weighted average interest rate Private Loans Typically Variable – Check Prom Note In school, Grace & Deferment Forbearance & Repayment

Prioritize repayment efforts – pay the most expensive debt FIRST!

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

Pay the interest on unsubsidized loans PRIOR to capitalization!

HOW TO POSTPONE PAYMENTS

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

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

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

REPAYMENT PLANS

Repayment plans Standard Extended Graduated Income Contingent* Income-Based Repayment (IBR) Determines the payment amount and interest cost

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 Typically yields the lowest overall loan cost Considerations Higher payment may be more difficult to manage if starting income is low BEST OPTION FOR BEST OPTION FOR: Borrowers whose primary goal is to minimize the repayment time period and the total interest cost of their loan debt

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

Graduated repayment 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 Provides a low initial monthly payment Offers predictable payment increases Considerations 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 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

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

Income-based repayment plan Monthly payments are based on household AGI and family size Partial interest subsidy during the first 3 years Unpaid interest does not capitalize when annual paperwork is filed timely and borrower demonstrates a PFH (partial financial hardship) Advantages Provides a flexible monthly payment associated with your income Considerations longer repayment term typically results in higher overall interest costs BEST OPTION FOR BEST OPTION FOR: Borrowers that have a lower income or are experiencing a financial hardship and need assistance making their monthly payment

More on IBR After 25 years of qualifying payments, any remaining debt will be forgiven You may choose IBR if your federal student debt is high relative to your AGI How to apply: Contact your lender to request Inform lenders, annually, of family size Give lenders permission to access tax returns Demonstrate a Partial Financial Hardship

IBR Formula Payment based on the 15% of income that exceeds 150% of the poverty line for a borrower’s family size Example: Family size: 1 (single) 150% of 2010 Poverty Guideline: $1354 Income: $47,716 ($3976 monthly)

IBR Formula $2623 $1354$3976 $393 15%$2623 Monthly Income 150% of poverty line Available income Monthly Payment - x

IBR Monthly Payment Amounts as of January

IBR calculators

Income-contingent repayment plan Monthly payments are based on household AGI, family size and your total Direct Loan debt You do not have to demonstrate ‘partial financial hardship’ Monthly payment must cover at least the interest due Payment generally higher than under IBR BEST OPTION FOR BEST OPTION FOR: Borrowers with income too low to afford payments under other repayment plans

Repayment plans Standard Extended Graduated Income Contingent Income-Based Repayment (IBR) Based on the original principal balance of $160k entering repayment after 4 years of Pharm school and 6 months grace $2,210/mo $1,300/mo $1000/mo $610/mo $390/mo

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

OTHER CONSIDERATIONS

Consolidation Multiple lenders to repay To obtain Public Service Loan Forgiveness To make Perkins loan eligible for IBR Lock-in low variable rates When to consider consolidation

Consolidation Effects of consolidation A longer term increases the interest costs Able to prepay or change repayment plan A new loan with new benefits May negatively affect grace, deferment or forgiveness options

Special Consolidation Must have loans owned by Direct Loans and FFEL lender Short term consolidation opportunity Consolidate your FFEL loans under Direct Loans What January 2012 thru June 30, 2012 When One servicer, one payment Interest rate reduction – 0.25% Qualify for Public Service Loan Forgiveness Why Do NOT initiate a consolidation on line Federal Servicers will contact eligible borrowers How

Loan Forgiveness Public Service Loan Forgiveness Eligible loansQualifying paymentsQualifying work

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

Public Service Loan Forgiveness Qualifying payments 120 payments to Direct Loans made under - Income-Based Repayment (IBR) - Income Contingent Repayment (ICR) - Standard 10-year Repayment While simultaneously working in public service

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

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

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

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

Useful Websites Loan Consolidationwww.loanconsolidation.ed.gov Your Loan Portfolio IBR Calculators Public Service Loan Forgiveness Student Loan Interest Deduction Loan Repayment Calculators tors/repayment Free Credit Report