Student Loans and Debt Management Exit Interview Cheri Marks Coordinator of Financial Aid and Student Records Spring 2012 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2012 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss exact loan balances and repayment options.

©2012 Association of American Medical Colleges. All rights reserved. 86% of class report having educational debt 59% of class report debt $150,000 or higher Public Schools Private Schools All Schools Mean$150,612$176,675$161,290 Median$155,000$180,000$162,000 Class of 2011 Indebtedness Refer to page 1 Source: FIRST analysis of AAMC 2011 GQ data. Education debt figures include premedical debt. education debt.

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

Agenda Know Your Loan Portfolio How to Postpone Payments Repayment Plans Options During Residency Other Considerations

©2012 Association of American Medical Colleges. All rights reserved. Know Your Loan Portfolio

©2012 Association of American Medical Colleges. All rights reserved. Master Promissory Note Refer to page 7 A contract with the lender Has a multi-loan feature Details Terms and Conditions Rights and Responsibilities

©2012 Association of American Medical Colleges. All rights reserved. Rights include the ability to: Prepay any federal loan without penalty Request a shorter repayment schedule Change repayment plans Request a deferment or forbearance Review your promissory note for all rights Refer to page 7 Rights and Responsibilities

©2012 Association of American Medical Colleges. All rights reserved. Rights and Responsibilities Responsibilities include: Make on time loan payments Make payments despite receipt of bill Notify the servicer of changes in contact info Attend an Exit Counseling session Review your promissory note for all responsibilities Refer to page 7

©2012 Association of American Medical Colleges. All rights reserved. A Serious Obligation Student loans must be repaid Manage your debt - don’t let it manage you Refer to page 7

©2012 Association of American Medical Colleges. All rights reserved. Delinquency Default Refer to page 8 Consequences of…

©2012 Association of American Medical Colleges. All rights reserved. Terms and Conditions Discharge may be available in cases of: Review your promissory note for all terms REFUND ERROR Refer to page 9

©2012 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 ( Refer to page 3

©2012 Association of American Medical Colleges. All rights reserved. Finding Federal Servicers Contact FSA at: Or Refer to page 4

©2012 Association of American Medical Colleges. All rights reserved. Interest Rates Refer to page 12

Repayment Strategy Prioritize repayment efforts – pay the most expensive debt FIRST!

©2012 Association of American Medical Colleges. All rights reserved. Capitalization Addition of unpaid interest to the principal Principal + Interest = Larger Principal Refer to page 12

Repayment Strategy Pay the interest on unsubsidized loans PRIOR to capitalization

©2012 Association of American Medical Colleges. All rights reserved. Loan Repayment Timeline Refer to page 13

©2012 Association of American Medical Colleges. All rights reserved. How to Postpone Payments

©2012 Association of American Medical Colleges. All rights reserved. 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 NOTE: For more details on forbearance or to request a forbearance, contact your servicer. Postponement Options Refer to page 15

©2012 Association of American Medical Colleges. All rights reserved. Postponement Options Refer to page 16 Forbearance A period when payments are not required Must request from the servicer Interest accrues on sub and unsub loans Many types (administrative, discretionary, mandatory) NOTE: For more details on forbearance or to request a forbearance period, contact your servicer(s).

©2012 Association of American Medical Colleges. All rights reserved. Forbearance Refer to page 16 Mandatory Medical Residency/Internship Use to postpone payments Interest accumulates on sub and unsub loans Request annually from servicer Continuous periods may avoid capitalization* *Check your servicer’s capitalization policy

©2012 Association of American Medical Colleges. All rights reserved. Repayment Plans

©2012 Association of American Medical Colleges. All rights reserved. Repayment Plans Determines the payment amount & interest cost Refer to page 18

©2012 Association of American Medical Colleges. All rights reserved. Equal monthly payments Higher monthly payments Lower total cost Repayment Plans Repayment term of 25 years Low monthly payment Likely the most expensive option Refer to page 18

©2012 Association of American Medical Colleges. All rights reserved. Lower initial payments (tied to income) Possible higher total cost Repayment Plans Payments start low, increase over time Possible higher total cost Likely the lowest monthly payment Refer to page 19

©2012 Association of American Medical Colleges. All rights reserved. Effects of each Repayment Plan on Total Cost Repayment Plans Refer to page 24

Debt Fact The lower the monthly payment… the higher the interest cost

©2012 Association of American Medical Colleges. All rights reserved. Estimated Monthly Payment Amounts Repayment Plans Refer to pgs 22-23

Repayment Strategy To reduce the cost of student loans - make extra payments

©2012 Association of American Medical Colleges. All rights reserved. Options During Residency

©2012 Association of American Medical Colleges. All rights reserved. The most feasible options during residency: Pay Later (using Forbearance) Pay Now (using Income-Based Repayment) Refer to pgs 24-25

©2012 Association of American Medical Colleges. All rights reserved. Income-Based Repayment Benefits Partial interest subsidy during the first 3 years Unpaid interest does not capitalize when: Annual paperwork is filed timely Borrower demonstrates a PFH Possible loan forgiveness *As reported to the IRS. Annual verification required of both AGI and family size Refer to page 20

©2012 Association of American Medical Colleges. All rights reserved. Income-Based Repayment To enter IBR, borrower must Contact each servicer individually to request Give access to household AGI* (tax records) Inform servicer(s), annually, of family size Demonstrate a Partial Financial Hardship (PFH) *As reported to the IRS. Annual verification is required of both AGI and family size. Refer to page 20

©2012 Association of American Medical Colleges. All rights reserved. Income-Based Repayment Formula for a Partial Financial Hardship (PFH): Standard payment* > IBR payment  More likely when income is low and debt is high  Max payment in IBR is the Standard amount*  1st post-M.D. year median stipend is $48,700** As originally determined when calculating Partial Financial Hardship based on $185,000 entering repayment ($ total education debt plus $23,000 of capitalized interest from 4-years of school and 6-months of grace). **Preliminary data from AAMC Survey of R/F Stipends and Benefits and AAMC Analysis $2,130 / mo* $410 / mo Refer to page 20

©2012 Association of American Medical Colleges. All rights reserved. Income-Based Repayment Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size Online IBR Calculators www. studentaid.ed.gov Refer to page 20

©2012 Association of American Medical Colleges. All rights reserved. Other Considerations

©2012 Association of American Medical Colleges. All rights reserved. Eligible Loans Qualifying Payments Qualifying Work Public Service Loan Forgiveness + + Loan Forgiveness Refer to page 37

©2012 Association of American Medical Colleges. All rights reserved. Other programs listed at AAMC website: Loan Forgiveness NIH Loan Repayment Programs: NHSC Repayment Program:

©2012 Association of American Medical Colleges. All rights reserved. Private Loans Details of 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 Refer to page 41

©2012 Association of American Medical Colleges. All rights reserved. Federal Loan Consolidation When to consider consolidation: Variable rates are low Multiple servicers to repay To obtain Public Service Loan Forgiveness (DL) To make Perkins or LDS loans eligible for IBR Refer to page 38

©2012 Association of American Medical Colleges. All rights reserved. Federal Loan Consolidation Effects of consolidating A longer term will increase the interest costs* Able to prepay or change repayment plan A new loan with new benefits** May negatively affect grace, deferment, cancellation or forgiveness options * The rate will be a weighted-average that may be rounded up to the nearest 1/8 th ** Forfeiture of original borrower benefits is likely. Future borrower benefits vary by lender. Refer to page 38

©2012 Association of American Medical Colleges. All rights reserved. Special Direct Consolidation Available January, 2012 thru June 30, 2012 Must have loans owned by Direct Loans Must have loans owned by a FFEL lender Do NOT initiate a consolidation online Federal servicers will contact eligible borrowers Refer to page 38 studentaid.ed.gov/specialconsolidation

©2012 Association of American Medical Colleges. All rights reserved. Full Deduction Partial Deduction NO Deduction Single $60,000 or less $60,001 to $74,999 $75,000 or more Married filing Jointly $120,000 or less $120,001 to $149,999 $150,000 or more Taxpayer Relief Act of 1997 Student loan interest deduction max $2,500 per year Voluntary payments may be eligible Capitalized interest may be included Refer to page 40

©2012 Association of American Medical Colleges. All rights reserved. Check your Credit Report Refer to page 27

©2012 Association of American Medical Colleges. All rights reserved. The FIRST Stop… Medloans ® Organizer and Calculator Refer to page 3

©2012 Association of American Medical Colleges. All rights reserved. Your residency program Your loan servicers’ and their websites Your medical school financial aid office The Next Steps FACEBOOK: FIRST for Medical Education Refer to page 42

Questions?