Why am I here?
Student Loans
and Debt Management
Exit Interview
Nicole Knight, MBA
AAMC
Spring 2015
Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2015 and are subject
to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options.
Oh, that’s why!
© 2015 Association of American Medical Colleges. All rights reserved.
Agenda
Know Your Loan Portfolio
How to Postpone Payments
Payments During Residency
Other Considerations
© 2015 Association of American Medical Colleges. All rights reserved.
Have a Spending Plan
Refer to page 40
© 2015 Association of American Medical Colleges. All rights reserved.
Have a Spending Plan
Refer to pages 37-40
www.aamc.org/FIRST
© 2015 Association of American Medical Colleges. All rights reserved.
www.mint.com
© 2015 Association of American Medical Colleges. All rights reserved.
1
Class of 2014 Indebtedness
Refer to page 1
Median MD School Debt: $180,000
PUBLIC
Know Your Loan Portfolio
PRIVATE
$170
170,,000
$200,000
Source: AAMC 2014 Graduate Questionnaire (GQ)
84% ofGot
classPrivate
report having
Loaneducational
Debt? debt
43% report
of $200,000
seedebt
pages
53 & 54or higher
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Class of 2014 Indebtedness
Finding Your Federal Loans
Refer to page 1
Refer to page 4
East Tennessee COM
To access, provide:
Median Education Debt
SSN
Education Debt
Date of birth
$175,000
First 2 letters of last name
Non-Education Debt (avg)
$ 8,000
FAFSA PIN or FSA ID
Refer to page 54
www.nslds.ed.gov
Source(s): 2014 Graduation Questionnaire and LCME I-B data, 87% w medical debt. 25% w premed debt (GQ survey)
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Subsidized Versus Unsubsidized
Refer to page 10
During Medical School
Refer to pages 11-12
Direct Subsidized
Direct Unsubsidized
Perkins*
Primary Care Loans
Loans for Disadvantaged
Students*
Institutional Loans (some)
Direct PLUS
Private Loans
Institutional Loans (some)
Consolidation Loans
Interest Rates
STAFFORD
LOAN
(underlying unsubsidized loans)
Consolidation Loans
(underlyng subsidized loans)
Subsidized
DIRECT
PLUS LOAN
PERKINS
LOAN*
Unsubsidized
* subsidy and deferment rights lost during consolidation
* PCL Loans and LDS Loans are also at a fixed 5%
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
2
During Medical School
During Medical School
Refer to pages 11-12
Refer to pages 11-12
Interest Rates (’13-’14 LOANS)
Interest Rates (’14-’15 LOANS)
DIRECT
PLUS LOAN
STAFFORD
LOAN
PERKINS
LOAN*
STAFFORD
LOAN
DIRECT
PLUS LOAN
PERKINS
LOAN*
* PCL Loans and LDS Loans are also at a fixed 5%
* PCL Loans and LDS Loans are also at a fixed 5%
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Capitalization
Repayment Strategy
Refer to page 13
Voluntary Payments
Addition of unpaid interest to the principal
1) Send as a Separate Payment
- w/ Instructions to APPLY NOW
- and Specify the Loan to Apply it to
(high rates are the priority)
2) Follow-up to Verify it was done
Principal
+
Interest
=
Pay the interest on your loans before they capitalize!
Larger
Principal
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Grace
Refer to pages 15-16
After Graduation
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
3
Options During Residency
Postponement Options
Refer to page 17
Deferment
Pay
Must apply and qualify
Not Pay
Interest is waived on subsidized loans
Unsubsidized loans continue to accrue interest
Qualification requirements are typically STRICT
NOTE: For more details, or to request a deferment or forbearance, contact your servicer.
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Postponement Options
Forbearance
Refer to page 18
Medical Residency Forbearance
Dr. Median’s situation after a 4-year residency
Balance
after
Grace
Postpones payments in annual increments
Interest accrues on all loans
TOTAL
PostResidency
Balance
Residency
Interest
$202K + $46K
=
$248K
Capitalization at the end of residency
(if increments requested back-to-back throughout)
Request the following increment 30-days before it is needed
NOTE: For more details, or to request a deferment or forbearance, contact your servicer.
© 2015 Association of American Medical Colleges. All rights reserved.
Based on a 2015 graduate indebtedness of $175,000 (numbers are rounded).
© 2015 Association of American Medical Colleges. All rights reserved.
Forbearance
Debt Fact
Dr. Median’s repayment of $248K after residency:
Plank
Yrs.
Monthly
Payment
Total
Interest
Total
Repayment
Standard
10
$2,4800
$161K
$336K
Extended
25
$1,700
$320K
$495K
The lower the
monthly payment,
the higher the
interest cost
Based on a 2015 graduate indebtedness of $175,000 (numbers are rounded).
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
4
Loan Repayment
Refer to pages 28-29
Payments During Residency
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Repayment Plans
Repayment Plans
Refer to pages 20-25
Refer to pages 20-25
Income-Driven
Traditional
Standard
Monthly payments for the
entire repayment term are
calculated
up-front and
Extended
disclosed to you.
Graduated
$2,300/mo
$1,350/mo
$1,100/mo
Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one.
© 2015 Association of American Medical Colleges. All rights reserved.
What’s the Catch?
$670/mo
$430/mo
Income-Contingent Repayment (ICR)
Monthly payments are
based on your income
Income-Based
Repayment
(IBR)*
and other factors
recalculated annually.
Pay As You Earn (PAYE)
$290/mo
Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one.
* New Borrowers on or after July 1, 2014 that select IBR will receive payment amounts equal to that of PAYE.
© 2015 Association of American Medical Colleges. All rights reserved.
IBR & PAYE Eligibility
Refer to page 22
Partial Financial Hardship (PFH)
Standard
$2,300 / mo
Payment
•
•
•
>
$430
PAYE
oror
(IBR)
IBR
$290
Payment
(PAYE)
Must have PFH to enter into IBR or PAYE
Can remain in IBR or PAYE in subsequent years,
even without a PFH
Must submit annual documentation
Max payment in IBR or PAYE is the Standard
amount (determined when entering the plan)
Based on a 2015 graduate indebtedness of $175,000 with a PGY1 stipend of $52,3000 and a family size of one.
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
5
Benefits Over Postponing
PAYE Eligibility
Refer to page 24
Additional requirements
PAYE
• No outstanding loans
on October 1, 2007
(or paid-off all outstanding loans
before receiving a new loan on
or after 10/1/07)
AND
• Received a Direct
Loan disbursement
on/after October 1, 2011
To Enter PAYE or IBR
to make some
loans eligible
Give
Provide
(i.e. – Perkins)
Access to
Family
Tax
Size
(annually)
Records
© 2015 Association of American Medical Colleges. All rights reserved.
15
IBR
12
Total
Repayment*
Total
Forgiven
$1,800$208K
2,300
$383K
$2,300 $176K
$351K
Total
Interest
•
Limited and delayed
capitalization
•
(PSLF or 25-Year Term)
Delayed capitalization
Why? To get a
low or zero
payment for 12
months
Why? To “skip”
grace and begin
process to
forgiveness
Why NOT? If goal is to
minimize overall cost…
don’t seek low payments
Why NOT? You will be
giving up the chance to
ever pay “strategically”
Now:
File 2014
Taxes
Allows for
smooth transition
into an IDR plan
if no significant
change occurs
PSLF or 20-Year Term
Immediately
After
Graduation:
Consolidate
all loans
TIP – Indicate
IBR or PAYE,
and immediately
submit the IDR
application to
your selected
servicer
Why? To
formally
document your
pursuit of PSLF
July:
Submit ECF
to FedLoan
Servicing’
TIP - Skip this if
you are not
seeking PSLF or
term forgiveness
with IBR or PAYE
Why? To
accurately
update payment
amounts
Next Year:
Provide
current
income &
family size
TIP - Respond
promptly when
requested by
your servicer
Dr. Median’s Post-Residency balance: $429K $422K
Plan
Yrs
$0K
PAYE
16
$0K
IBR
*starting salary $200,000. Based on a 2015 graduate indebtedness of $175,000 and a 4-year residency..
(A PFH exists 0 years after residency (in IBR) and 5 years post residency in PAYE plan)
© 2015 Association of American Medical Colleges. All rights reserved.
Low payments
Partial subsidy ($1,300)
A maximum payment
Forgiveness
After Resident w $300K Indebtedness
$229K
Dr. Median’s Post-Residency balance: $237K
PAYE
•
•
•
•
•
•
© 2015 Association of American Medical Colleges. All rights reserved.
After Residency
Monthly
Payment
Low Payments
Partial Subsidy ($1,000)
A maximum payment
Forgiveness
Possible Path Into Payment
Show a
Apply w/
Partial
Each TIP:
Financial
Consolidation
Servicer
Hardship
may be needed
To Enter
PAYE or IBR
Yrs
•
•
•
•
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Plan
IBR
Monthly
Payment
Total
Interest
$1,800$433K
2,700
$2,600 19
$463K
$4,000
Total
Repayment*
Total
Forgiven
$433K
$391K
$763K
$0K
*starting salary $200,000. (A PFH exists 16 years after residency ends in both IBR and the PAYE plan)
© 2015 Association of American Medical Colleges. All rights reserved.
6
The FIRST Stop
The FIRST Stop
Refer to page 3
A tool for graduates!!
®
Medloans Organizer and Calculator
Using NSLDS & the
®
Medloans Organizer and Calculator
Select this
Button
Export
your loans
www.aamc.org/FIRST
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
So, What’s The Best Strategy?
IBR or
PAYE
Forbearance
Ease and
Flexibility
Minimize
Debt
Voluntary
and
Aggressive
Payments
Minimize
Payment
Free
Money
Other Considerations
NHSC,
PSLF,
PAYE, or
IBR
© 2015 Association of American Medical Colleges. All rights reserved.
Loan Forgiveness (PSLF)
© 2015 Association of American Medical Colleges. All rights reserved.
Dr Median and PSLF
Refer to pages 45-46
Dr. Median pursues Public Service:
Eligible Loans
+
+
Qualifying Payments
Qualifying Work
Pediatrician at a community health center
IBR for 10 years (3yr. residency + 7yrs. after)
Has PFH for all 10 years
Qualifies for Public Service Loan Forgiveness
Public Service Loan Forgiveness
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
7
Loan Forgiveness (PSLF)
Loan Forgiveness (PSLF)
Refer to pages 45-46
Dr. Median’s loans after 10 years of public service:
Want to know more?
Total Paid (IBR)………………...$160K*
Total Forgiven (IBR)……………............$165K
Total Paid (PAYE)……………...$107K*
Total Forgiven (PAYE)……………….....$223K
www.aamc.org/FIRST
*starting salary &130,000.
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Should You Consolidate?
Repayment Assistance
Refer to pages 50-51
Information on other
programs:
aamc.org/stloan
lrp.nih.gov
nhsc.hrsa.gov
AAMC
National Institutes of
Health (NIH)
National Health
Service Corps
(NHSC)
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
Are There Any Tax Benefits?
The Next Steps
Refer to page 52
Refer to page 55
Full Deduction
Partial
Deduction
NO Deduction
Single
$65,000 or less
$65,001 to
$80,000
$80,001 or
more
Married
filing
Jointly
$130,000 or
less
$130,001 to
$160,000
$160,001 or
more
Limited to: First 60 months of repayment
Max student loan interest deduction: $2,500/year
May be eligible: Voluntary payments & capitalization
www.irs.gov/publications/p970
© 2015 Association of American Medical Colleges. All rights reserved.
© 2015 Association of American Medical Colleges. All rights reserved.
8
Questions?
“An investment in knowledge always
pays the best interest”
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© 2015 Association of American Medical Colleges. All rights reserved.
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