Presenter’s name Presenter’s title Spring 2011

1. Student Loans and Debt ManagementExit Interview Presenter’s name Presenter’s title Spring 2011 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2011 and are subject to change. These are estimates only. Students should always contact their servicer(s) to discuss exact loan balances and repayment options.

2. 86% of class report having educational debt 59% of class report debt $150,000 or higher Class of 2010 Indebtedness Refer to page 1

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

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

5. Know Your Loan Portfolio

6. Refer to page 6 A contract with the lender Has a multi-loan feature Rights and Responsibilities Details Terms and Conditions MasterPromissoryNote

7. Rights include the ability to: Rights and Responsibilities Refer to page 7 • 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

8. Rights and Responsibilities Responsibilities include: Refer to page 7 Make on time loan payments • Make payments despite receipt of bill • Notify the lender of changes in contact info • Attend an Exit Counseling session • Review your promissory note for all responsibilities

9. A Serious Obligation Student loans must be repaid Refer to page 6 Manage your debt -don’t let it manage you

10. Consequences of… Refer to page 8 Delinquency Default

11. Terms and Conditions Discharge may be available in cases of: • Review your promissory note for all terms

12. Finding Your Federal Loans Refer to page 4 • To access, provide: • - SS# • - Date of Birth • - First 2 letters (last name) • - PIN # (www.pin.ed.gov) www.nslds.ed.gov

13. Interest Rates Refer to page 11

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

15. Capitalization Addition of unpaid interest to the principal Refer to page 11 $182,670 $160,000 $22,670 Larger Principal + Interest Principal =

16. Repayment Strategy Pay the interest on unsubsidized loans PRIOR to capitalization

17. Loan Repayment Timeline Refer to page 13

18. How to Postpone Payments

19. Postponement Options Refer to page 15 • 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.

20. Postponement Options Refer to page 16 • Forbearance A period when payments are not required Must request from the lender/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 lender/servicer(s).

21. Postponement Options Refer to page 16 • MandatoryMedical Residency/Internship Used to postpone payments Interest accumulates on sub and unsub loans Requested annually from lender Continuous periods may avoid capitalization* *Check your servicer’s capitalization policy

22. Repayment Plans

23. Repayment Plans Refer to page 18 $2,100/mo Determines the payment amount & interest cost $1,300/mo $1,000/mo $ 610/mo $ 390/mo

24. Repayment Plans Refer to page 18 • Equal monthly payments • Higher monthly payments • Lower total cost • Repayment term of 25 years • Low monthly payment • Likely the most expensive option

25. Repayment Plans Refer to page 19 • Payments start low, increase over time • Possible higher costs • Lower initial payments (tied to income) • Possible higher costs • Likely the lowest monthly payment

26. Repayment Plans Refer to page 24 Effects of each Repayment Plan on Total Cost

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

28. Repayment Plans Refer to page 22 Estimated Monthly Payment Amounts

29. Options During Residency

30. The most feasible options during residency: Pay Later (using Forbearance) Pay Now (using Income-Based Repayment)

31. Income-Based Repayment • IBR Repayment Plan 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 • Borrower demonstrates a PFH • *As reported to the IRS. Annual verification required of both AGI and family size

32. Income-Based Repayment • To obtain IBR, borrower must do the following Contact each lender individually to request Inform lenders, annually, of family size Give lenders permission to access tax returns Demonstrate a Partial Financial Hardship (PFH)

33. Formula for a Partial Financial Hardship (PFH): Standard payment* >IBR payment More likely to occur when income is lower and debt is higher Max payment in IBR is the Standard amount* 1st post-M.D. year median stipend is $47,700 Income-Based Repayment $390 / mo $2,100 / mo* * As originally determined when calculating Partial Financial Hardship based on $182,000 entering repayment ($160,000 total education debt plus $22,000 of capitalized interest from 4-years of school and 6-months of grace).

34. Income-Based Repayment Online IBR Calculators www.finaid.org www.IBRinfo.org www.aamc.org/FIRST Determined by Calculating 15% of income that exceeds 150% of the poverty line for a borrower’s family size

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

36. Other Considerations

37. Loan Forgiveness Refer to page 37 Eligible Loans + Qualifying Payments + Qualifying Work Public Service Loan Forgiveness

38. Loan Forgiveness • Other programs listed at AAMC website: • www.aamc.org/stloan NIH Loan Repayment Programs: • www.lrp.nih.gov NHSC Repayment Program: • www.nhsc.hrsa.gov/loanrepayment

39. Private Loans Refer to page 40 • 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

40. Federal Loan Consolidation Refer to page 38 • When to consider consolidation: Variable rates are low Multiple lenders to repay To obtain Public Service Loan Forgiveness (DL) To make Perkins or LDS loans eligible for IBR

41. Federal Loan Consolidation Refer to page 38 • 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, or forgiveness options * The rate will be a weighted-average that may be rounded up to the nearest 1/8th ** Forfeiture of original borrower benefits is likely. Future borrower benefits vary by lender.

42. Taxpayer Relief Act of 1997 Refer to page 39 Student loan interest deduction max $2,500 per year Voluntary payments may be eligible Capitalized interest may be included www.irs.gov/publications/p970

43. Refer to page 29 Check your Credit Report www.annualcreditreport.com

44. The FIRST Stop… Refer to page 3 Medloans® Organizer and Calculator • www.aamc.org/FIRST

45. Support Along the Way www.aamc.org/FIRST FIRST for Residents Mailbox FACEBOOK: FIRST for Medical Education Your loan servicers’ and their websites Your residency program Your medical school financial aid office • www.ombudsman.ed.gov

46. Questions? FIRST@AAMC.org