Money Management for Medical Students Entrance Interview Michael T. Goodman Associate Vice President...

Money Management for Medical Students

Entrance Interview

Michael T. Goodman

Associate Vice President

Tulane University Financial Aid 8/4/2011Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of June 2011 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.

“An investment in knowledge always pays

the best interest”

- Benjamin Franklin

©2011 Association of American Medical Colleges. All rights reserved.

Introduction

Operations

Know the Details of Your Loans

The Timeline

Borrowing Strategically

Have a Spending Plan

Understand and Protect Your Credit

Disbursements of aid

Refunds for living expenses

Reconsiderations

Applying for 2012-2013

Aid for 2012 summer

Additional information

Questions???

Agenda


Introduction

Tulane University Health Sciences Center

Office of Financial Aid

Suite 1213, Tidewater Building

1440 Canal Street

Serving…

School of Medicine

School of Public Health & Tropical Medicine


Operations

Counselor by alphabet (last name):

A-HIP: Carl Hudson, Counselor

HIQ-MCC: James Bourgeois, Assistant Director

MCD-Z: Shirley Davis, Counselor

Monday-Thursday from 12-4PM @ the 15th floor of the Murphy Building…Jonathan Jouet, Counselor

Program Coordinator: Donna Fasullo


Operations

Tidewater Office

Hours: 9AM – 5PM, Monday – Friday

Counselors available: M-W 1PM – 4PM Th & F 9AM – 1PM

Recommend appointments

Communications: (504) 988-6135(504) 988-6136 fax

Website: http://tulane.edu/financialaid/hsc/


At This Point…

Accepted aid award via Gibson on-line

Completed Direct Loan entrance counseling on-line (for both Stafford and Graduate PLUS Loans)

Completed Direct Loan master promissory notes (MPNs) on-line (for both Stafford and Graduate PLUS Loans)

If awarded and accepted Federal Perkins Loan, completed Perkins MPN on-line (via ACS)

Completed direct deposit information on-liner with the Tulane Accounts Receivable Office


Know the Details of Your Loans


The FIRST Stop…

www.aamc.org/FIRST

Medloans® Organizer and Calculator

Refer to page 3


Master Promissory Note

Refer to page 6

A contract with the lender

Has a multi-loan feature

Carefully read before signing

Rights and responsibilities


Rights include the ability to:

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

Refer to page 7

Rights and Responsibilities


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

Review your promissory note for all responsibilities

Refer to page 7


A Serious Obligation

Student loans must be repaid

Manage your debt -don’t let it

manage you

Refer to page 6


Delinquency

Default

Refer to page 8

Consequences of…


Finding Your Federal Loans

To access, provide:

- SS#

- Date of Birth

- First 2 letters (last name)

- PIN # (www.pin.ed.gov)

www.nslds.ed.gov

Refer to page 4

http://www.pin.ed.gov/


Finding Other Loans

www.annualcreditreport.com

Refer to page 4

To access, provide:

- Name

- Address

- Date of Birth

- Social Security #


Refer to page 11

Interest Rates


Loan Fees

Federal Perkins: none

Federal Stafford: 0.5% example: borrow $10,000 with 0.5%

fees: $10,000 x 0.5% = $50$9,950 disbursed, yet

repayment = $10,000

Federal Graduate PLUS: usually 2.5%

Alternative Loans: usually 0% front fees, varies on back-end fees, check with private loan lender


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: www.dictionary.com

Refer to page 9


Subsidized vs. UnsubsidizedRefer to page 9

Subsidized Stafford

Perkins*

Primary Care Loans

LDS Loans*

Instiututional Loans (some)

Consolidations Loans (underlyng subsidized loans)

Unsubsidized Stafford

Direct PLUS

Private Loans

Institutional Loans (some)

Consolidation Loans (underlying unsubsidized loans)

Subsidized Unsubsidized

*subsidy and deferment rights lost during consolidation


Capitalization

Addition of unpaid interest to the principal

Principal + Interest =Larger

Principal

$160,000$182,670

$22,670

Refer to page 11

Debt Management Tip

Pay the interest on unsubsidized loans PRIOR to

capitalization


If dropping below half-time or withdrawing:

Contact the Financial Aid Office immediately

Exit Counseling is required

Payments are required or grace periods begin

For questions contact your Financial Aid Office

NOTICE: Repayment BeginsRefer to page 8


Direct PLUS loans

Enters repayment upon full disbursement

In-school deferment will post-pone payments

Interest begins accruing upon disbursement

Interest accrues continuously

Maximum interest rate is 7.9%

NOTICE: Repayment BeginsRefer to page 22


The Timeline


Grace Periods

Grace

A period when payments are not required :

Occurs automatically

Subsidized loans are interest free during grace

Unsubsidized loans continue to accrue interest

Availability and duration is based on loan type

Refer to page 19


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 deferment or to request a deferment, contact your servicer

Options During ResidencyRefer to page 21


Options During ResidencyRefer to page 22

Forbearance

A period when payments are not required

Must request from the servicer

Interest accrues on sub and unsub loans

Many types (administrative, discretionary, mandatory)

NOTE: For more details on forbearance or to request a forbearance, contact your servicer


Options During Residency

Determines the payment

amount &

interest cost

Refer to page 24

$2,100/mo

$1,300/mo

$1,000/mo

$ 610/mo

$ 390/mo


Strategic Borrowing


Alternatives to DebtRefer to page 13

ScholarshipsSupport

Forgiveness/

Repayment

Options

• Ou

tside

• Service b

ased

• Institu

tion

al

• www.aamc.org/stloan

III II

i

• Financial Aid O

ffice

• Family


Borrow WiselyRefer to page 14


Borrow Wisely

Private Monthly Payment

Total Interest

Total Cost

10 Years $722 $46,640 $86,640

PLUS Monthly Payment

Total Interest

Total Cost

10 Years $565 $27,800 $67,800

Stafford Monthly Payment

Total Interest

Total Cost

10 Years $527 $23,240 $63,240

Based on borrowing $40,000 (unsubsidized) with interest capitalizing after 4 years of medical school;based on interest rates of 6.8% (Stafford), 7.9% (Grad Plus), 12% (Private).

Refer to page 15


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


CHALLENGE

Borrowing $5,000 less each year will REDUCE:

Monthly Payment By: $400 (+)

The Total Loan Cost By: $39,000 (+)

Repayment Term By: 2 (+) years

Borrow Wisely

Note: Assumes amount borrowed in Stafford Loans with 6.8% interest with forbearance during a 3-year residency

Source: AAMC FIRST Analysis

TIP: Have a budget and borrow less

Refer to page 17



A Spending Plan in 1-2-3

1) 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 33



www.aamc.org/FIRST

Refer to page 36


The Basics of BudgetingRefer to page 33

Your Total Income

Your Total Expenses

Your Discretionary Income


Tulane Budgeting & Billing

You will receive by e-mail a monthly billing statement detailing charges and credits that occurred during the prior month.

2011-2012 School of Medicine’s tuition & fees: $24,475.00 tuition per semester $ 1,300.00 academic support fee per semester $ 120.00 student activity fee per semester $ 272.00 health services fee per semester $ 87.50 rec. center fee per semester $26,254.50 = Total tuition & fees per semester

Other charges: Books, Parking, Deming Pavilion, Health Insurance

Refer to page 15



Financial Aid Budget for the 2011-2012 Academic Year:assumption: not residing with parents

Tuition & fees: $52,509

Room & board: $13,720*

Books & supplies $ 1,500

Transportation: $ 3,026*

Miscellaneous: $ 3,926*

TOTAL: $74,681

*$20,672 living expenses equates to $2,067/month

Refer to page 15



Financial Aid Award for the 2011-2012 Academic Year:

Federal Direct Subsidized Stafford Loan:$ 8,500

Federal Direct Unsubsidized Stafford Loan: $32,000

Federal Direct Graduate PLUS Loan: $34,181

TOTAL: $74,681

Thus, total financial aid award = total cost of attendance.

Refer to page 15


Disbursements of Aid

Example of 2011 Fall Semester disbursements:

Tuition & fees $26,254.50 = $26,254.50

- Sub. Staff. ($ 4,229.00)

- Unsub. Staff. ($15,920.00)

- Grad. PLUS ($16,664.00) = $36,813.00

= A/R balance ($10,558.50)

+ Refund $10,558.50

= A/R balance $ 0.00

Refer to page 15

Are Credit Cards Bad?


The Minimum Payment Trap

$5,000 Balance with an 18% Interest Rate (Making minimum monthly payments)

Source: BankRate.com

Refer to page 35

22.75 years to repay in full

$6,923 in total interest costs alone

What could possibly be worth paying more than twice its original value?


Credit: Understand & Protect


35%

30%

15%

10%10%

Payment history

Utilization rate (amount owed)

Length ofcredit history

New credit

Type of credit used

A FICO Score is Based On…Refer to page 30


How to Improve Your Score

During medical school, be sure to:

Refer to page 29

Pay bills on time

Pay down debt on lines of credit

Apply for credit sparingly


Refer to page 31

Check your Credit Report

www.annualcreditreport.com


Your loan servicers’ and their websites

Your medical school financial aid office

Support Along the Way

FACEBOOK: FIRST for Medical Education

www.aamc.org/FIRST

www.ombudsman.ed.gov

Refer to page 7

Careers in Medicine ®

Medloans ® Organizer and Calculator


Reconsiderations

Computer purchase (max. = $2,500)

only allowed once during medical school career

Combined MD/MPH degree program

Special financial circumstances

Receive any other financial assistance:outside scholarship and/or grant

Refer to page 15


Applying for 2012-2013

2012-2013 FAFSA

2012-2013 School of Medicine Financial Aid Addendum

No need for new federal loan MPN

Apply for Grad PLUS or private loan (since credit-based)

2012 Summer aid for MD/MPH

Refer to page 15


Additional Information

Outside Scholarships:www.finaid.org

check bulletin board and e-mail

Communication: Tulane e-mail address

Emergency loans:not an ATM $1,000 maximum per academic year

[email protected]

Refer to page 15

http://www.finaid.org/

Questions?

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