Money Management for Entering Medical School Students Entrance Interview Texas Tech HSC 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.

Agenda Know The Details of Your Loans The Repayment Timeline Borrowing Strategically Have a Spending Plan Understand and Protect Your Credit

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

©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

©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

©2014 Association of American Medical Colleges. All rights reserved. Know the Details of Your Loans

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

©2014 Association of American Medical Colleges. All rights reserved. Master Promissory Note (MPN) Refer to page 6 Is a contract with the lender Can be used for multiple years Read before signing Lists your rights & responsibilities

©2014 Association of American Medical Colleges. All rights reserved. Rights include the ability to: Prepay without penalty Request a shorter repayment schedule Change repayment plan Request a deferment or forbearance See the MPN for all rights Refer to page 6 Rights and Responsibilities

©2014 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 lender of changes in contact info Attend an Exit Counseling session See the MPN for all responsibilities Refer to page 6

©2014 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 9

©2014 Association of American Medical Colleges. All rights reserved. Delinquency Default Refer to page 7 Consequences of…

©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 ( Refer to page 4

©2014 Association of American Medical Colleges. All rights reserved. Finding Other Loans Refer to page 4 To access, provide: - Name - Address - Date of Birth - SSN

©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 (’14-’15 loans) Refer to page 9

©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: Refer to page 8

©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

©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

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

©2014 Association of American Medical Colleges. All rights reserved. If dropping below half-time or withdrawing Contact the Financial Aid Office Exit Counseling is required Payments are required (or grace periods begin) NOTICE: Repayment Begins Refer to page 8

©2014 Association of American Medical Colleges. All rights reserved. NOTICE: Repayment Begins Refer to page 19 Know the facts about PLUS Loans

©2014 Association of American Medical Colleges. All rights reserved. The Repayment Timeline

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

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

©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

©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

©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 Deferment Forbearance

©2014 Association of American Medical Colleges. All rights reserved. Repayment Plans The plan you choose determines the monthly payment amount Refer to pgs Based on an original principal balance of $175,000 * * For new borrowers on or after July 1, 2014, the IBR monthly payment amount will resemble the PAYE monthly payment amount.

©2014 Association of American Medical Colleges. All rights reserved. Estimated Monthly Payments Refer to pgs 32-33

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

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

©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

©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

©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

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

©2014 Association of American Medical Colleges. All rights reserved. BORROWING CHALLENGE $5,000 less each year will REDUCE: Monthly Payment By: $300(+) The Total Loan Cost By: $36,000(+) Borrow Wisely Note: Assumes amount borrowed in Stafford Loans with 6.21% interest with forbearance during a three-year residency Source: AAMC FIRST Analysis TIP: Have a budget and borrow less Refer to page 17

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

©2014 Association of American Medical Colleges. All rights reserved. Have a Spending Plan A Spending Plan in ) 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

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

©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

©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

©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

Are Credit Cards Bad?

©2014 Association of American Medical Colleges. All rights reserved. The Minimum Payment Trap Source: BankRate.com $5,000 balance with an 18% interest rate (Making minimum monthly payments) Refer to page 43

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

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

©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

©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

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

©2014 Association of American Medical Colleges. All rights reserved. Your loan servicers’ and their websites Your medical school financial aid office Support Along the Way Facebook: FIRST for Medical Education studentaid.ed.gov Refer to page 11 Medloans ® Organizer and Calculator

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