Debt Management for Dental Students Jason DiLorenzo

- 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 ~$203K 2011 * Based on data collected by ADEA and GL internal student database Changes in Student Debt Levels

1.Federal Loan Basics 2.Federal Loan Repayment Options 3.Private Loan Repayment Options 4.Dental Case Studies 5.How to Calculate Payments 6.Review and Q & A Key Takeaway: How recent and upcoming regulations will help address the mounting debt burden facing many dental students. Agenda

Unsubsidized Stafford Subsidized Stafford Perkins Grants/Scholarships Grad PLUS Low Cost To Borrower High Cost To Borrower Federal Loans: (Stafford, Grad PLUS) Federal Stafford: Fixed Rate 6.8% (since July 1st 2006) Subsidized: government pays interest during school and deferment Unsubsidized: all interest accrues Direct Graduate PLUS: Fixed Rate 7.9% (all interest accrues) Private Loans: Sometimes needed for Externships, Internships, or Residencies Interest rates vary Margins have decreased but minimum credit requirements have tightened High Rate Private Low Rate Private Sources of Funding

- Confidential Document, Property of Graduate Leverage, LLC - Key to student loan management is finding the right balance between these two competing pressures. The right balance will change over time! $1,000 Competing Pressures Liquidity Total Cost of Your Student Debt $1,000 $ 500 $ 150,000$ 300,000

Federal Loan Repayment Options Ways to Postpone Payments: Forbearance: NO SUBSIDY – All loans accrue interest. Economic Hardship Deferment (EHD): FULL SUBSIDY – Unsubsidized accrue interest. In-School Deferment: FULL SUBSIDY – Unsubsidized accrue interest Ways to Make Full Payments: Standard 10 Year Term NO SUBSIDY – Shortest term available Prepaying Prepayment allowed without penalty on all federal repayment programs.

Federal Loan Repayment Options Ways to Reduce Payments: Extended 25 Year Term: NO SUBSIDY Consolidated 30 Year Term: NO SUBSIDY Available for consolidated loans $60,000 or greater Income-Based Repayment (IBR): PARTIAL SUBSIDY Pay As You Earn (ICR-A): PARTIAL SUBSIDY No loans before Oct loan post Oct. 2011

IBR and ICR-A Partial Financial Hardship Limit monthly payment to 15% of discretionary income, capped at 10-year standard payment 2012/2013: 10% (ICR-A) Government Subsidy Subsidized interest not covered by reduced payment is paid by government Subsidy is provided for maximum of 3 years Taxable Loan Forgiveness After 25 years any outstanding balance is forgiven 2012/2013: 20 years (ICR-A)

Many Graduates Not Taking Advantage Of New Tax Breaks Taxes during final year school: 1.Lifetime Learning Tax Credit 2.Tuition and fees tax deduction 3.Married Filing Jointly or Separately Decision Process: Tax benefit of each option calculated Changes in subsidy benefit added back for final number

Tax Free Forgiveness PSLF – Public Service Loan Forgiveness Federal program enacted by Congress in 2007 Specific requirements: Borrower must make 120 qualifying payments on a Federal Direct Loan Borrower must work for a public service entity as defined by the program, such as a Federal, State, Local, or non-profit organization New Employment Certification Form (released 2012) Savings opportunity immense – more stringent requirements.

- Confidential Document, Property of Graduate Leverage, LLC - Private Loans or Federal Loans Understand the Loss of Federal Benefits For illustrative purposes only. Assumptions based on good credit & sample lenders. % Current 3% Interest Rate Increase? 7.9% 4.9% Private or Grad PLUS Loan ? 7.5%

Important Considerations – Federal Loan Benefits: Evaluate loss of federal repayment plans / forgiveness opportunities – Fees: Application or origination fees may erode savings potential – Interest Rate: Evaluate rate difference and type: Variable vs. Fixed Solutions for High Rate Debt Pay Down Quickly Refinance to Lower Interest Rate Pay Down Quickly Refinance to Lower Interest Rate Private Loan Grad PLUS 7.9% / 8.5% Grad PLUS 7.9% / 8.5% Credit Card Debt 15%+ Credit Card Debt 15%+

Case Details 2013 graduate, unmarried, family size of one $260,000 total debt, all Federal debt ($159K Stafford / $101K Grad PLUS) $100,000 starting salary increasing by 3% annually high monthly expenses Monthly PaymentsTotal Payments ICR-A* Y1: $264 Y10: $856 Y20: $1,303$329,435 3 Year Forbearance + 10 Year Y4: $3,757 $450,799 * Total payments under ICR-A and IBR include tax liability generated from forgiven loans. 30 Year Consolidated Term $1,774$638, Year Extended Term $1,901$570,295 IBR* $504,340 Y1: $396 Y10: $1,284 Y20: $1,955 Case #1

- Confidential Document, Property of Graduate Leverage, LLC - Present Value Savings of ~$90k * PV analysis includes tax liability and assumes 3% annual increase in salary increase. Detailed assumptions available upon request.

Case Details 2013 graduate, married, family size of three (one child) $202,000 total debt $25,500 Subsidized Stafford and $136,500 Unsubsidized 6.8% $20,000 Grad and $25,000 Private 9.5% 1 year of general practice residency at $25,000, salary increases to $120,000 Spouse salary of $60,000 Monthly PaymentsTotal Payments IBR* Y1: $0 Y10: $2,078 Y25: $2,078 $334, Year Term $1,286 $385,901 3 Year Forbearance + 25 Year Y4: $1,553$466,025 ICR-A* Y1: $0 Y10: $1,517 Y20: $1,984 $342,963 * Total payments under ICR-A & IBR include tax liability generated from forgiven loans. Case #2

Refinance 9.5% Private Loan $38,819 $31,820 Lowering interest rate on private loan by 4.5% saves $7,000 in interest costs. Greater savings for larger principle amounts. Total Paid $ 9.5% 5.0% Loan

Case Details 2013 graduate, unmarried, family size of one $96,000 total debt $80K 6.8% $8K 8.25% $8K 9.5% $130,000 starting salary increasing by 3% annually, NO FORGIVENESS 1 st & 2 nd Year Monthly PaymentsExtra Cash Flow 10 Year Standard $0 $924 $583 IBR $350 $389 ICR-A $500 Case #3 Targeting

Consolidation – 4.75% Stafford – 6.8% LoansLoans Repayment Period Typical Repayment Plan Private Loan % Grad Plus – 7.9% 8 yrs10 yrs Effective Rate (APR) = 6.29% $11,675 Effective Rate (APR) = 5.69% Non-payment Non-pay 9.25% 0.5 yr Targeted Repayment Plan 7.9% 1 yr5 yrs 9.5 yrs 4.75% 6.8% 7 yrs Case #3 Targeting *Assumes $168,000 in federal debt and $8,000 in private loans

9.5% w/$500 prepay 8.25% w/$500 prepay 15 MONTHS Targeting Private Loans Total Paid $ 10 YEARS $12,422 $8, YEARS 28 MONTHS $11,775 $9,146 Savings of $6,566 earned in 28 months of prepayment. Case #3 Targeting

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

- Confidential Document, Property of Graduate Leverage, LLC - What every dental student with 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.Position Loan for Appropriate Balance Between Liquidity and Total Cost a)Calculate monthly payment options and compare to monthly budget b)Take advantage of “exceptions to the rule” – targeting and forgiveness c)Evaluate refinancing opportunities

What every dental student with loans should do: 3. 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 4. Manage your Financial Net worth a)Properly allocate discretionary income b)Only invest when returns exceed cost of debt and liquidity issues met

Thank You If you have any questions or would like a personalized debt assessment, please call or visit our website. Jason DiLorenzo *The information in this presentation is for informational purposes only.