Office of Financial Aid Duke University School of Medicine Loan Information

Office of Financial Aid

Duke University School of Medicine

Loan Information

All Rights Reserved, Duke Medicine 2007

Agenda

Loan Basicso Termso TypesWhat happens after Graduation?o Internship & Residency Optionso Sample Loan Repayment ScenarioTracking/Managing Debt


Types of Loans

• Unsubsidized Stafford Loan

• Grad PLUS Loan

• Alternative Loans

• Fixed Rate vs. Variable

• Federal, Institutional, Private


Unsubsidized Loans

• Interest begins to accrue at the time of disbursement

Types of unsubsidized loans• Federal Direct Unsubsidized Loan• Federal Grad PLUS Loan• Other Private/Alternative Loans


Federal Direct Unsubsidized Stafford

• Interest Rate: fixed at 6.8%• Grace Period: 6 months• Borrowing Limits:

– $47,166 is the maximum for the 2012-2013 school year.

– A student can borrow only up to the cost of attendance less any other assistance received.


Grad PLUS• Direct PLUS loans include federally guaranteed unsubsidized loans for

graduate students who have additional financial need beyond what federal Stafford loans cover. Borrowers are encouraged to use federal loans before turning to unregulated private loans to fund their education costs.

• Direct PLUS Loan Benefits: • Can fill the gap between a medical school's financial aid cost of attendance and the annual maximum of Stafford loans• Can be included in a federal consolidation loan• Low interest rate of 7.9%• Deferring repayment includes in school deferment and 6

month post-enrollment deferment


Alternative Loans• Private Education Loans, also known as Alternative Education Loans,

help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs. Private loans are offered by private lenders and there are no federal forms to complete. Eligibility for private student loans often depends on your credit score.

• The interest rates and fees you pay on a private student loan are based on your credit score and the credit score of your cosigner, if any.

• Private student loans typically have variable interest rates, with the interest rate pegged to an index, such as LIBOR or PRIME, plus a margin

http://www.finaid.org/loans/privateloan.phtml/creditscores.phtml

http://www.finaid.org/loans/privateloan.phtml/creditscores.phtml


Federal Direct Loans

• Loans will be managed by one of five servicers• Servicers randomly selected:

– ACS Education Services– Federal Loan Servicing (PHEAA)– Great Lakes Educational Loan Servicer, Inc.– Nelnet– Sallie Mae


Capitalization of Interest

• Unpaid accrued interest on unsubsidized loans is added to the original amount borrowed (i.e. principal balance), thereby increasing your total indebtedness.

• Unsubsidized Stafford Loans: – First capitalization typically occurs six months after

borrower leaves school– Borrowers receive quarterly interest statements– Borrowers have the option to pay interest prior to

capitalization


National Student Loan Data System (NSLDS)

• U.S. Department of Education’s central database for Federal Direct Loans.

• Allows borrower to track loan balances and identify servicers of loans

• Federal PIN required to access site: www.nslds.ed.gov

http://www.nslds.ed.gov/


Customer Service• Federal Direct Loans:

Direct Loan Servicing CenterPO Box 5609Greenville, TX 745031-800-848-0979

Your account number is your social security number


AAMC Medloans Organizer and Calculator

• Organizer and Calculator is a secure and personalized, one-stop online loan management resource tool

• Available at www.aamc.org/first

• Enter your 2012-2013 (and previous, if any) loan information in the Medloans Organizer and Calculator

http://www.aamc.org/first


After Graduation

• Internship/Residency– Deferment– Forbearance

• Repayment Plans• Sample Repayment Scenarios• Loan Forgiveness Programs


Forbearance & Deferment

• Forbearance: an arrangement to postpone or reduce a borrower’s monthly payment amount for a limited and specified period or to extend the repayment period. The borrower is charged interest during forbearance.

• Deferment: the temporary postponement of loan payments. During deferment, interest does accrue.


Repayment Options

• Federal Stafford Loans– Standard fixed amount for 10 years– Extended: fixed amount extended over 12 to 30 years– Graduated: 10 years to repay, however, the payment

amount increases gradually over the life of the loan– Income Contingent/Income Based: monthly payment is

based on the borrower’s adjusted gross income. Interest rate is fixed. Maximum repayment period is 25 years.

– Public Service Loan Forgiveness


Sample Borrower Repayment

• Single• No Dependents• Lives in U.S.• Annual Gross Income: $130,000• Amount Borrowed: $115,000• Interest Rate: 6.8%


Standard Repayment

• Under this plan you will pay a fixed monthly amount for a loan term of up to 10 years. Depending on the amount of the loan, the loan term may be shorter than 10 years. There is a $50 minimum monthly payment.


Sample Standard Loan Repayment

• Term: 10 years• Monthly Payment: $1,323• Cumulative Payments: $158,810• Total interest Paid: $43,811


Extended Repayment

• This plan is like standard repayment, but allows a loan term of 12 to 30 years, depending on the total amount borrowed. Stretching out the payments over a longer term reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan.


Sample Extended (Fixed)

Fixed• Term: 25 years• Monthly Payment: $798• Cumulative Payments: $239,454• Total interest Paid: $124,454


Graduated Repayment

• Unlike the standard and extended repayment plans, this plan starts off with lower payments, which gradually increase every two years. The loan term is 12 to 30 years, depending on the total amount borrowed. The monthly payment can be no less than 50% and no more than 150% of the monthly payment under the standard repayment plan. The monthly payment must be at least the interest that accrues, and must also be at least $25.


Graduated Repayment Option

• Loan Term: 10 years• Monthly Payment: $909• Cumulative Payments: $167,389• Total Interest Paid: $52,389


Loan Term for Extended/Graduated Repayment

• For extended and graduated repayment, the following chart shows how the maximum loan term depends on the amount borrowed.

Loan Balance s Maximum Loan Term

Less than $7,500 10 years

$7,500 to $9,999 12 years

$10,000 to $19,999 15 years

$20,000 to $39,999 20 years

$40,000 to $59,999 25 years

$60,000 or more 30 years


Income Contingent• The Income Contingent Repayment (ICR) plan is designed to make

repaying education loans easier for students who intend to pursue jobs with lower salaries, such as careers in public service. It does this by pegging the monthly payments to the borrower's income, family size, and total amount borrowed. The monthly payment amount is adjusted annually, based on changes in annual income and family size.

• The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged (forgiven). Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now on the amount discharged that year. But the savings can be significant for students who wish to pursue careers in public service. And because you will be paying the tax so long from now, the net present value of the tax you will have to pay is small.

http://www.finaid.org/loans/npv.phtml


Sample Income Contingent

• Loan Term: 7.25 years• Monthly Payment $1644• Cumulative Payments: $146,215• Total Interest Paid: $31,215


Income-Based Repayment

• The College Cost Reduction and Access Act of 2007 introduced income-based repayment as a more generous alternative to income-sensitive and income-contingent repayment, starting on July 1, 2009. Unlike income-contingent repayment and income-sensitive repayment, it is available in both the Direct Loan and FFEL programs. Income-based repayment is like income contingent repayment, but caps the monthly payments at a lower percentage of a narrower definition of discretionary income.


IBR continuedEligible Federal Loans• The following loans from the William D. Ford Federal Direct Loan (Direct Loan)

Program and the Federal Family Education Loan (FFEL) Program are eligible for IBR:

• Direct Subsidized Loans• Direct Unsubsidized Loans• Direct PLUS Loans made to graduate or professional students• Direct Consolidation Loans without underlying PLUS loans made to parents• Subsidized Federal Stafford Loans• Unsubsidized Federal Stafford Loans• FFEL PLUS Loans made to graduate or professional students• FFEL Consolidation Loans without underlying PLUS loans made to parents

Loans That Are Not Eligible• The following loans are not eligible for repayment under IBR:• Any PLUS loans made to parents• FFEL Consolidation Loans that include underlying PLUS loans made to parents• Private education loans


IBR continuedAdvantages of IBR• Pay based on what you earn—Under IBR, your monthly payment amount will be 15

percent of your discretionary income, will never be more than the amount you would be required to pay under the Standard Repayment Plan, and may be less than under other repayment plans.

• Interest payment benefit—If your monthly IBR payment amount doesn’t cover the interest that accrues (accumulates) on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loan or Subsidized Federal Stafford Loan for up to three consecutive years from the date you began repaying your loan under IBR.

• Limitation on the capitalization of interest—While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance.

• 25-year cancellation—If you repay under IBR for 25 years and meet certain other requirements, any remaining balance will be canceled.

• 10-year public service loan forgiveness—If, while you are employed full-time for a public service organization, you make 120 on-time, full monthly payments under IBR (or certain other repayment plans) you may be eligible to receive forgiveness of the remaining balance of your Direct Loans through the Public Service Loan Forgiveness Program.

http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service


IBR continuedDisadvantages of IBR• You may pay more interest—A reduced monthly payment in IBR generally means you’ll

be repaying your loan for a longer period of time, so you may pay more total interest over the life of the loan than you would under other repayment plans.

• You must submit annual documentation—To set your payment amount each year, your loan servicer, the organization that handles billing and other services for your loan, needs updated information about your income and family size. You must provide the documentation or your monthly payment amount will be reset to the amount you would be required to pay under the Standard Repayment Plan, based on the amount you owed when you began repaying under IBR. This amount will be higher than your payment under the IBR program.

• You may have to pay taxes on the amount that is forgiven or canceled.

IBR Calculator

• http://studentaid.ed.gov/repay-loans/understand/plans/income-based

http://studentaid.ed.gov/repay-loans/understand/servicers

http://studentaid.ed.gov/repay-loans/understand/plans/income-based

http://studentaid.ed.gov/repay-loans/understand/plans/income-based


Repayment Option Need to Know• Gradauted: Monthly payment amounts will generally

increase every two years based on the gradation factor in the graduated repayment rules.

• Income Contingent: Repayment amount will be calculated annually and is subject to change based on poverty guidelines for the family size determined by the US Dept. of Health and Human Services. Plan has a maximum of 25 years.

• No prepayment penalty.• Can switch repayment plans.


Comparing Repayment Plans• The following table compares each of the major repayment plans with

standard ten year repayment. As the table illustrates, increasing the loan term reduces the size of the monthly payment but at a cost of substantially increasing the interest paid over the lifetime of the loan. For example, increasing the loan term to 20 years may cut about a third from the monthly payment, but it does so at a cost of more than doubling the interest paid over the lifetime of the loan. This table is based on the unsubsidized Stafford Loan interest rate of 6.8%.


Repayment Planand Loan Term

Reduction inMonthly Payment

Increase inTotal Interest Paid

Extended Repayment - 12 years

12% 22% (factor of 1.22)


23% 57% (factor of 1.57)


34% 118% (factor of 2.18)


40% 184% (factor of 2.84)


43% 254% (factor of 3.54)

Graduated Repayment 50% initial payment38% average reduction

89% (factor of 1.89)

Income Contingent Repayment(Salary = initial debt, 4% annual raise)

41% declining to 33%37% average reduction

178% (factor of 2.78)


Public Service Loan Forgiveness• Under this program, you may qualify for forgiveness of the remaining

balance due on your eligible federal student loans after you have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers.

• The following loans may be consolidated into the Direct Loan Program: – Federal Family Education Loan (FFEL) Program loans, which include

Subsidized Stafford Loans – Unsubsidized Stafford Loans – Federal PLUS Loans—for parents and graduate or professional students – Federal Consolidation Loans (excluding joint spousal consolidation loans) – Federal Perkins Loans – Certain Health Professions and Nursing Loans


• The 120 required payments must be made under one or more of the following Direct Loan Program repayment plans:

– Income Based Repayment (IBR) Plan (not available to parent Direct PLUS Loan borrowers)

– Income Contingent Repayment Plan (not available to parent Direct PLUS Loan borrowers)

– Standard Repayment Plan with a 10-year repayment period – Any other Direct Loan Program repayment plan; but only

payments that are at least equal to the monthly payment amount that would have been required under the Standard Repayment Plan with a 10-year repayment period may be counted toward the required 120 payments


• You must be employed full time (in any position) by a public service organization, or must be serving in a full-time AmeriCorps or Peace Corps position. Organizations that meet the definition of “public service organization” for purposes of the PSLF Program are listed below. – A government organization (including a federal, state, local, or tribal

organization, agency, or entity; a public child or family service agency; or a tribal college or university);

– A non-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code (includes most not-for profit private schools, colleges, and universities);

– A private, non-profit organization (that is not a labor union or a partisan political organization) that provides one or more of the following public services:

– Emergency management – Military service – Public safety – Law enforcement – Public interest law services – Early childhood education (including licensed or regulated health care, Head Start,

and state-funded pre-kindergarten)


– Public service for individuals with disabilities and the elderly – Public health (including nurses, nurse practitioners, nurses in a clinical setting, and

full-time professionals engaged in health care practitioner occupations and health care support occupations)

– Public education – Public library services – School library or other school-based service

• For detailed information, including how to monitor your progress toward qualifying for PSLF, review the PSLF Questions and Answers document at www.studentaid.ed.gov/publicservice or contact your Direct Loan servicer.


Repayment Calculators Finaid.org• The Loan Payment Calculator may be used to calculate what your

monthly payments would be under the standard and extended repayment plans.

• The Loan Comparison Calculator is like the loan payment calculator, but allows you to compare three loans side by side.

• The Income Contingent Repayment Calculator may be used to calculate an estimate of what your monthly payments would be under income contingent repayment plans, and compares the total payments with the standard and extended repayment plans.

• The Undergraduate Master's and Doctoral student loan advisor calculators provide an estimate of the debt the student can reasonably afford, given the expected starting salary for their field.

http://www.finaid.org/calculators/loanpayments.phtml

http://www.finaid.org/calculators/loancomp.phtml

http://www.finaid.org/calculators/icr.phtml

http://www.finaid.org/calculators/undergradadvisor.phtml

http://www.finaid.org/calculators/mastersadvisor.phtml

http://www.finaid.org/calculators/doctoraladvisor.phtml


• The Parent Loan Advisor provides parents with an estimate of the amount of educational debt they can afford for their children's education, given their current salary and other debt obligations.

• The Cost of Interest Capitalization calculates the additional cost over the lifetime of a loan if a student capitalizes the interest of an unsubsidized Stafford loan during the in-school period.

• There are also other loan calculators in the Calculators section of FinAid, including a Loan Analyzer that does a detailed comparison of the financial impact of various loan features, including loan fees, interest rates, repayment terms, interest capitalization, and prompt payment incentives.

http://www.finaid.org/calculators/parentadvisor.phtml

http://www.finaid.org/calculators/interestcap.phtml

http://www.finaid.org/calculators

http://www.finaid.org/calculators/loananalyzer.phtml


Additional Resources

• AAMC- link from our website • School of Medicine Financial Aid Website http://

medschool.duke.edu/education/financial-aid-office

• Loan Forgiveness- look on AAMC website

http://medschool.duke.edu/education/financial-aid-office

http://medschool.duke.edu/education/financial-aid-office

Questions?

Documents

Office of Financial Aid Duke University School of Medicine Loan Information