Congratulations Exit Interview Class of 2004

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Congratulations Exit InterviewClass of 2004
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Goals of the Exit Interview

• 1. Know what you borrowed, know who you borrowed
• from, and know who services the loans.
• 2. Know the relative cost of your loans.
• 3. Know your grace periods, deferment options,
  and
• forbearance options.
• 4. Know your decision points and keep a
  calendar.
• 5. Run the numbers before choosing a repayment
• plan or consolidating your loans.
• 6. Commit to keeping good records.
• 7. Keep a budget and know when you need the help
• of a financial professional.
• 8. Know and use your support systems.

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Class of 2003 Educational Debt

• mean for all schools of 109,467
• median for all schools of 105,500
• mean for public schools of 97,275
• median for public schools of 100,000
• mean for private schools of 129,932
• median for private schools of 135,000
• AAMC 2003 Graduation Questionnaire includes
  all debt.

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Class of 2004 Debt

• Average debt total 142,170
• Average RMC debt 133,930
• Number of borrowers 99
• Highest debt 240,000

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Debt range
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As a borrower, you have a right to

• Written information on loan obligations,
  including loan consolidation.
• An explanation of default and its consequences.
• A copy of your promissory note and return of the
  original note when the loan is paid in full.
• Prior to repayment, balance information and a
  repayment schedule.
• Be notified if your loan is sold.
• A federal subsidy, if eligible.
• Grace and deferment periods, if eligible.
• Request forbearance during financial difficulty.
• Prepay your loan early without penalty.

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As a borrower, you have a responsibility to

• Repay the loan according to the schedule you
  select.
• Notify your loan servicer of anything that
  affects your ability to repay the loan.
• Notify your loan servicer of any changes in your
  status, including when you graduate.
• Notify your loan servicer and school of any
  changes to name, address, and phone numbers.
• Notify your loan servicer if you fail to enroll
  for the period covered by your student loan.
• Attend a loan Exit Interview before you graduate.

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Subsidized Loans

• Loans which have no interest cost to the borrower
  while in school, grace and deferment periods.
• Examples of subsidized loans include
• Federal Subsidized Stafford
• Federal Perkins
• Primary Care Loans (PCL)
• Loans for Disadvantaged Students (LDS)
• Rush Institutional loans

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Unsubsidized Loans

• Loans which accrue interest from disbursement,
  including while in school, grace and deferment
  periods.
• Borrower is responsible for all accrued and
  capitalized interest.
• Examples of unsubsidized loans include
• Federal Unsubsidized Stafford
• Private loans

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What is the relative cost?

• Refers to a) the interest rate and b) the
  capitalization policy on your student loans.
• The interest rate is what the lender charges you
  to use their money.
• The capitalization policy refers to how fast the
  lender adds any accrued and unpaid interest on
  unsubsidized loans back to your principal.

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Interest Rates on Student Loans

• Stafford rate is variable, indexed to the 91-Day
  Treasury Bill, changes each July 1st, and is
  capped at 8.25
• Perkins rate is 5 fixed throughout repayment
• PCL and LDS rate is 5, fixed throughout
  repayment
• Credit based loans/Alternative loans are
  typically tied to the LIBOR rate or Prime rate
  (consult your promissory note or contact the
  lender)
• Rush Institutional loans are fixed at 5
  throughout repayment
• To find out the T-bill and any other rates from
  one of several websites out there go to
  www.bankrate.com/goocalj/ratehm.asp

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Capitalization

• Addition of unpaid interest to the principal
  balance of your loan, which increases your total
  amount due.
• The less frequent the better.
• Capitalization once at repayment may not mean
  what you think (repayment is technically the
  day after your grace period expires), so check
  with your loan servicer if you do not know when
  they capitalize interest.

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Grace Period

• Period of time following graduation when you are
  not required to pay on your loans.
• You do not have to apply for grace it is
  automatic.
• Subsidized loans are interest free during grace
  (there is no cost to the borrower).
• Unsubsidized loans are not interest free during
  grace (the borrower is responsible for all
  accrued interest).
• Grace periods are loan specific, meaning a) the
  length depends on the type loan and b) once you
  use up a grace period, you do not get the grace
  period again for that particular loan.

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Deferment

• Period of time when a borrower may suspend
  payments if certain conditions are met.
• Regardless of type, they are good for one year at
  a time, and borrowers must apply each year.
• Subsidized loans are interest free during
  deferment (there is no interest cost to the
  borrower).
• Unsubsidized loans are not interest free during
  deferment (borrower is responsible for all
  accrued interest).

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Some Common Deferment Types

• There are several types of deferment, but three
  in particular are of interest to residents.
• Internship Residency Deferment
• (eligible to only borrowers who took loans prior
  to July 1, 1993)
• 2. Economic Hardship Deferment - EHC
• 3. Graduate Fellowship Deferment

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Internship Residency Deferment

• Available for old Stafford borrowers (those who
  began borrowing prior to July 1, 1993, and who
  did not pay off their Stafford balance in full
  prior to taking out a new Stafford on or after
  that date).
• Old Stafford borrowers may defer all their
  Staffords for 2 years, one year at a time .
• Available for Perkins Loans disbursed prior to
  July 1, 1993 (2 years maximum).
• Available for PCL and LDS for eligible borrowers.

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Economic Hardship Deferment

• Based on a ratio of your federal loans in
  repayment to your income.
• Available to new Stafford borrowers, those who
  first started borrowing on or after July 1, 1993.
• Available for all Perkins Loans.
• Maximum deferment is 3 years, one year at a time.
• The MEDLOANS publication Economic Hardship
  Deferment Frequently Asked Questions may help
  answer questions about the hardship deferment.
• T.H.E. Program offers an interactive calculator
  at
• www.northstar.org/EconHardship.html.

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Hardship Deferment Eligibility Formula

• TWO conditions must be met, and they BOTH must be
  met for a borrower to qualify
• Condition 1
• the borrowers total monthly loan payments on
  FEDERAL education loans amortized over 10 years
  must EQUAL or EXCEED 20 of their monthly gross
  incomeand
• Condition 2
• the borrowers monthly gross income minus total
  monthly loan payments as described above must be
  LESS than 2,189.00
• 220 of the greater of the monthly wage or
  the monthly living standard for a family of two
• living in poverty subject to change each
  year contact your lender/servicer for details

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Hardship Deferment - Do You Qualify?

• Assumptions
• PGY-1 annual salary 38,238
• PGY-1 monthly salary 3,187
• Loan portfolio (34,000 Sub, 66,000
  Unsub) 100,000
• monthly loan payments (at 4) 1,012
• Do you meet Condition 1? Yes
• 1,012 is equal to or greater than 20 of your
• monthly gross income (20 of
  3,187 is 637)
• Do you meet Condition 2? Yes
• 2,175 (3,187 minus 1,012) is
  less than 2,189.00
• YOU SHOULD QUALIFY FOR THE
• ECONOMIC HARDSHIP DEFERMENT

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Graduate Fellowship Deferment

• Based on borrowers participation in an eligible
  fellowship program.
• Both borrower and program must meet certain
  criteria
• Unlimited for Staffords if eligibility
  requirements met.
• You are not eligible if you are still in
  residency but are simply called a fellow by
  your residency program.
• Check promissory note for provisions on other
  loans.

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Suggestions when filing for deferment

• Apply 30 to 60 days prior to the expiration of
  your grace period (watch for a reminder notice
  from your servicer).
• When filing for hardship, your loan servicer
  cannot count federal loans they do not know about
  (that they do not service), so be prepared to
  document other federal loans.
• Use pay stubs, W2s, tax returns, and other income
  documentation when filing for hardship.
• Married borrowers filing a joint return may want
  to use documentation other than their joint
  return (W-2s).
• Remember to file each year.

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Forbearance

• Adjustments when you are having financial
  difficulty.
• You must apply for forbearance.
• Forbearance usually runs for 6 to 12 months.
• Forbearance provisions vary by loan type.
• Interest accrues and may be capitalized on all
  loans during forbearance, including loans that
  were formerly subsidized, and the interest rate
  goes up .6 on variable rate Staffords during
  forbearance.
• Forbearance does not adversely impact your credit.

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more about Forbearance

• Mandatory forbearance for medical residents is
  available on all Stafford loans throughout
  residency.
• During mandatory forbearance on Stafford loans,
  you may either a) stop payments completely or b)
  reduce your scheduled payment amount.
• Mandatory forbearance should help prevent
  delinquency or default.

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Delinquency and Default

• Delinquency
• at 30-60 days past due can report on your credit
  history
• failure to make payment when due
• adversely impacts your credit
• delinquency can lead to default
• Default
• 270 days past due file a claim for default
• failure to repay your education loan
• adversely impacts your credit
• adversely impacts your future borrowing ability
• adversely impacts your institution

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12/04
12/06
12/05
12/07
12/08
12/09
6 month grace
Federal Stafford Sub and Unsub
NEW BORROWER
Federal Stafford Sub and Unsub
OLD BORROWER
Federal Perkins on or after
Check with the Student Loan Office about
July 1, 1993
Economic Hardship Deferment
MUST APPLY EACH YEAR
Residency deferment (must be primary care)
PCL and LDS
MUST APPLY EACH YEAR
Check your promissory note for details
Institutional Loans will honor EHD if qualify on
Federal Loans contact Maria Rubio at 312.942.5257
Institutional Loans
or ask your financial aid officer
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Stafford Loan Repayment Options

• Standard (Level) Repayment
• Graduated Repayment
• Income Based Repayment
• Extended Repayment

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Loan Consolidation

• Paying off multiple loans with one new loan.
• Consolidation is considered a repayment option.
• Consolidation is right for some borrowers, not
  for others.
• Check out the primer on consolidation at
  www.aamc.org/MEDLOANS.
• Talk to your financial aid officer.
• Call your servicer.
• There are advantages and disadvantages.
• One Lender/Servicer Rule.

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Possible advantages to consolidation

• You can protect against any future interest rate
  increases by locking in a fixed rate (which is
  one of the main reasons some borrowers
  consolidate).
• This could result in cost savings on your loans.
• You have the convenience of one servicer for all
  consolidated loans.
• Reduce your monthly payment.
• Have all your federal loans at one place.

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Possible disadvantages to consolidation

• You cannot take advantage of any future interest
  rate decreases.
• You will lose borrower benefits on any loans you
  consolidate that had benefits attached to them.
• Accrued interest will capitalize when you
  consolidate.
• You may adversely impact grace and deferment
  options.
• Depending on the loan, you may lose the interest
  subsidy.
• Your monthly payments may be lower, but your
  total repayment costs could be much higher if you
  extend repayment beyond 10 years.

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The difference between 10 and 30 years

• Based off of 100,000 with the maximum variable
  interest rate of 8.25 on the life of the loan.
  Including the 6 month grace period, 3 years of
  residency, capitalization at repayment, no early
  payments and no borrower benefits
• Standard (Level) Repayment
• 1,572 per month over 10 years (120 months)
• 88,589 total interest costs
• 188,589 total repayment costs
• Consolidation
• 963 per month over 30 years (300 months)
• 246,538 total interest costs
• 346,538 total repayments costs

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Keeping good records of your loans

• Keep all your loan papers such as promissory
  notes, disclosure statements, and award letters
  with your exit interview information.
• Bookmark your lenders Web site and use it to
  track your loan balance.
• Keep in touch with your lender via email, phone
  and/or snail mail.
• When calling about your loans, document when you
  call and who you speak with.
• Keep important numbers handy.
• Open your mail.

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Budgeting with your stipend

• Mean PGY-1 stipend 38,238
• less one third for taxes, FICA 12,619
• Annual take home pay 25,619
• Monthly take home pay 2,135
• Interactive Calculator to estimate take home pay
  (net income) at www.paycheckcity.com/

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Budgeting with your stipend (continued)

• You should eventually net more income as a
  resident than when you were a student.
• Consider paying down any consumer or other
  financial obligations you have, as well as paying
  down student loan early.
• Consider speaking with a financial professional
  to help you make the most out of your additional
  income.
• The better you manage your loans and your credit,
  the better position you will be in to make
  choices about your additional income.

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Should you use a financial professional?

• You will refer patients to specialists, so you
  should not be afraid of seeing a financial
  professional yourself.
• They should talk with you about budgeting.
• They should talk with you about both short term
  and long term goals.
• Ask if your hospital sponsors seminars with
  financial professionals.
• Be sure you have your loan records handy.
• Be sure you know how their fee structure.

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Loan Repayment Programs

• Service commitment programs following graduation
  or residency.
• These programs pay down loans in exchange for
  service
• Some offer tax incentives.
• Programs are currently available through various
  states, the Public Health Service (including the
  NHSC), the Armed Forces, and NIH.
• Check out the AAMCs Web site www.aamc.org/student
  s for a listing of these programs.

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Support during residency

• Your medical school financial aid officer.
• By contacting your loan servicer.
• DEBTHELP, the AAMCs Educational Debt Management
  Services for Residents at www.aamc.org/debthelp.
• (MD)2 - Monetary Decisions for Medical Doctors at
  www.aamc.org/students.
• Careers in Medicine at www.aamc.org/students.
• Ask if your teaching hospital has a debt
  management program for residents.
• U.S. Department of Educations Ombudsman.

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Office of Ombudsman

• Designed to provide help when other reasonable
  efforts to resolve a student loan dispute have
  failed.
• Be sure you have good records before you call the
  Ombudsman.
• You can reach the Ombudsman at 1.877.557.2575 or
  on the Web at www.ombudsman.ed.gov.

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List of Helpful Websites

• Department of Educations website
  www.ed.gov.index.jsp
• Access Groups website www.accessgroup.org
• BankOnes website www.studentloannet.com
• Citibanks website www.studentloan.com
• Direct Loans website www.dlssonline.com
• IDAPP's website www.idapp.org/index.htm
• Sallie Maes website www.salliemae.com

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Okay, so now what do I do?

• Get your loan records in order before PGY-1
  orientation.
• Commit to keep good records and open your mail.
• Keep your Loan Repayment Timeline handy.
• Check out DEBTHELP for residents at
  www.aamc.org/debthelp and subscribe to
  MONEYMATTERS.
• Let your loan servicer and alumni office know how
  to reach you.

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Review of Exit Interview Goals

• 1. Know what you borrowed, know who you borrowed
• from, and know who services the loans.
• 2. Know the relative cost of your loans.
• 3. Know your grace periods, deferment options,
  and
• forbearance options.
• 4. Know your decision points and keep a
  calendar.
• 5. Run the numbers before choosing a repayment
• plan or consolidating your loans.
• 6. Commit to keeping good records.
• 7. Keep a budget and know when you need the help
• of a financial professional.
• 8. Know and use your support systems.

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Final Reminders

• Complete and return the multi-part Federal
  Student Loan Exit Interview form inside right
  pocket.
• Perkins and Institutional loan recipients watch
  for e-mail announcement to sign repayment
  schedules (end of May).
• Put May 25 on your calendar financial planning
  and Loan Consolidation program.

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Congratulations!Best Wishes from the
Office of Student Financial Aid! _______