residency loans residency living student loans october 6, 2008
TRANSCRIPT
The interest rate on your loan will be based on one of following financial indexes
Prime Rate that US banks lend money +/- percentage
points
LIBOR London Interbank Offered Rate + percentage
points
Interest rate will be a variable interest rate for the life of the loan
May not be a cap on the interest rate
Rate is based on your credit score
Repayment begins when you are no longer a full-time student
Grace period varies by lender-check promissory note
Forbearance options also vary by lender-check promissory note
Interest continues to accrue during grace and forbearance
The calculations assume the loan is taken in October of the M4 year and is followed by a 3 year residency in which a forbearance is granted.
10 Year Loan Repayment
5%Interest Rate
11.75%Interest Rate
Loan Amount $6,000 $6,000
Principal at Repayment $7,125 $8,644
Finance Charges Over Life of Loan
$3,069 $8,732
Monthly Payment $76 $123
Repayment Terms 120 120
10 Year vs 25 Year Loan Repayment
5%Interest Rate
11.75%Interest Rate
Loan Amount $6,000 $6,000 $6,000 $6,000
Principal at Repayment $7,125 $7,125 $8,644 $8,644
Finance Charges Over Life of Loan
$3,069 $6,496 $8,732 $20,831
Monthly Payment $74 $41 $123 $89
Repayment Terms 120 300 120 300
The calculations assume the loan is taken in October of the M4 year and is followed by a 3 year residency in which a forbearance is granted.
•Average expenses between $3,500-$5,000•Stay with family and friends•Room with other students interviewing in same area•Schedule interviews in one location at same time•Contact program for interview if already going to be in area•Rent a car to check out the area•Take a cab so you don’t get lost
A good score can mean that “life” will cost you less, and thus you can afford more:
Better loan terms (student, auto, mortgage)
Lower Interest rates on credit cards
Faster credit approvals
Reduced security deposits on rentals
© AAMC 2008. May not be reproduced without permission.
Each of the three credit reporting agencies are required by law to provide one free credit report to you annually
Equifax Experian TransUnion
This is the site to obtain your free copy www.annualcreditreport.com
Regularly monitor your financial information (every 4 months)
Verify that the information contained in the report is correct
Report any discrepancies to the credit agency
Clean up any negative reporting
The number one indicator of your financial health
Range is 300-850 (the higher, the better)
Shows a lender your credit worthiness
Determines the cost of your debt
Named after the company, Fair Isaac Corporation, that produces the score
© AAMC 2008. May not be reproduced without permission.
35%
30%
15%
10%
10%
Payment history
Amounts owed
Length ofcredit history
New credit
Type of credit used
© AAMC 2008. May not be reproduced without permission.
Home Price: $250,000Loan: 30-year Fixed Rate
FICO Interest Rate Payment 760+…………...………6.106%………...……….$1,819 700-759………….…....6.328%…………………$1,862 660-699……………….6.612%………………....$1,918 620-659……………….7.422%………………....$2,082 580-619……………….9.452%…………………$2,512 500-579…………...…10.311%………….……..$2,702
Annual Monthly
Residency Stipend $46,000 $3,833
Payroll Taxes $12,132 $1,011
Net Spendable Income
$33,868 $2,822
Monthly Gross Pay $3,833
Federal Withholding $537Social Security $238Medicare $56Nebraska Withholding $181
Net Spendable Income
$2,822
www.payroll-taxes.com/calculators.htm
CategorySuggested Percentage
Monthly Amount
Housing 36% $1,016
Food 12% $339
Auto 12% $339
Insurance-Health, Life 5% $141
Debt 5% $141
Entertainment/Recreation 6% $169
Clothing 5% $141
Savings 5% $141
Medical/Dental Expenses 4% $113
Miscellaneous 5% $141
Investments/Retirement 5% $141
Net Spendable Income $2,822
www.crown.org/tools/calculators
CategorySuggested Percentage Monthly
Amount
Housing 36% $1,016
Food 12% $339
Auto 12% $339
Insurance-Health, Dental, Life 5% $141
Debt 5% $141
Entertainment/Recreation 6% $169
Clothing 5% $141
Savings 5% $141
Medical/Dental Expenses 4% $113
Miscellaneous 5% $141
Investments/Retirement 5% $141
Net Spendable Income $2,822
Savings from Pre-Tax Deductions
Monthly Gross Wages $3,833 $3,833
Federal Withholding $537 $445
Social Security $238 $238
Medicare $56 $56
Nebraska Withholding $181 $157
Health Insurance $115
Medical/Dental $113
Retirement $141
Net Pay $2,822 $2,569
Savings from Pre-Tax DeductionsMonthly Gross Wages $3,833 $3,833
Taxes $1,012 $896
Health Insurance $115
Medical/Dental $113
Retirement $141
Post Tax Payments $369
Spendable Income Balance
$2,453 $2,569
A student loan portfolio can be complex
Each loan type has its own set of terms and conditions to consider
Understanding your loan portfolio is the first step in effectively managing its repayment
TIP: Know who your servicer is.
© AAMC 2008. May not be reproduced without permission.
All federal loans can be found at www.nslds.ed.gov
All federal, private and institutional loans can be found on your credit report
www.annualcreditreport.com
In school, Grace and Deferment
Forbearance,Repayment
Stafford Loans(disbursed on or after 7/1/06)
6.8% Fixed
6.8%Fixed
Stafford Loans*(disbursed between 7/1/98 and 6/30/06)
3.61%Variable
4.21%Variable
Grad PLUS Loans**
8.5%Fixed
8.5%Fixed
Perkins Loan / PCL / LDS 5.0% Fixed
5.0% Fixed
Private Loans Typically Variable – Check the Promissory Note
Institutional Loans Varies by Loan – Check the Promissory Note
Consolidation Loan Fixed rate based on weighted average interest rate of underlying loans rounded up to nearest one-eighth of a
percent (capped at 8.25%)
* Variable, changes every July 1 based on the 91-day treasury bill
** Interest rate for Direct Grad PLUS Loans 7.9%
© AAMC 2008. May not be reproduced without permission.
There are many options with student loans during residency and beyond:
To Postpone Payments Grace Deferment Forbearance
To Reduce Payments Interest Only Payments Change the Repayment Plan
© AAMC 2008. May not be reproduced without permission.
Standard (Level) Repayment
◦ 10 year repayment with a fixed monthly payment
Graduated Repayment
◦ 10 year repayment with smaller early year payments
Extended Repayment
◦ 25 year repayment with a fixed monthly payment
Income Sensitive Repayment (FFEL) /Income Contingent Repayment (DL)
◦ Payment is 20% of difference of Adjusted Gross Income less 100% poverty level
◦ Balance remaining after 25 years is forgiven-the amount of debt forgiven is treated as taxable income
Income-Based Repayment
◦ Payment is 15% of difference of Adjusted Gross Income less 150% of poverty level
◦ Balance remaining after 25 years is forgiven-the amount of debt forgiven is treated as taxable income
◦ Public Service Loan Forgiveness available