A Strategic Approach to Managing Your Debt and Finances During Your Utah Residency University of Utah Resident Orientation Presented by John Collins, Managing Director of GL Advisor Agenda • IBR versus PAYE • Tying the Knot • Training Exit Interview • White House Budget Proposal Changes in Student Debt Levels ~$300k+ ~$220k ~$89k ~$50k 1993 2000 2013 Debt levels have quadrupled in the last 20 years * Based on data collected by AAMC, AMA and GL internal student database IBR vs PAYE INPUTS Total Federal Student Loan Debt Weighted Average Interest Rate $300,005 7.09% Family Income, Last Year $0 This Year's Family Income $26,000 1 Family Size State Lower 48 Assumed Attending Salary $250,000 • PAYE provides additional $2,270 in liquidity during residency $3,000.00 Monthly IBR Payment $2,000.00 Monthly PAYE Payment $1,000.00 $0.00 $0.00 1 2 3 Years in Residency 3 4 5 • PAYE reduces total cost by $83,450 compared to IBR when considering PSLF Recent order by Obama broadens eligibility Tying the Knot A PGY2 resident with $207k in federal student loan debt on academic career track gets married. How does the loan repayment strategy change if the spouse has no student loan debt and makes $90K salary? Forgiveness Potential $3,000.00 $232,039 $2,500.00 $2,000.00 $1,500.00 $1,000.00 Forgiveness potential $500.00 $150,305 $0 1 2 3 4 5 6 7 8 Year Monthly Payment, Filing Separate Monthly Payment, Filing Joint 9 10 11 EXIT INTERVIEW After 4 years of training, a graduating resident contemplates the next step in her career. How does loan forgiveness impact the economics of working for a non-profit? Original Debt: Debt after training: Non-profit salary offer: For-profit salary offer: $250,000 $308,000 $155,000 $205,000 Salary Equivalent Public VS Private $300,000.00 Actual For-Profit Practice Salary Additional from Public Service derived from forgiveness $250,000.00 $200,000.00 $94,076.74 $150,000.00 $205,000.00 $100,000.00 $155,000.00 $50,000.00 $Public/Non-Profit Actual Public Service Salary Base Salary For-Profit Added Salary Equivalent for PSLF Assumptions: PAYE eligible. The taxable equivalent amount assumes a marginal federal tax rate of 20% and a marginal state tax rate of 5%. White House Budget Proposal Repayment Under Obama's Proposal Income Driven Limited to 10% of discretionary income Repayment Cap on payments Calculation removed 10 Years if working in the Public Sector AND loan balance less than $57,500 Loan Forgiveness 20 years for borrowers with total loan balance less than $57,500 25 years for borrowers with total loan balance greater than $57,500 • Expansion of PAYE to all federal loan borrowers • Helps reduce cost for borrowers, simplify process for servicers • Removal of the cap on payments • New cap on amount forgiven through PSLF • $57,500 limit, based on max borrowing amount for independent undergrads • Balances above $57,500 will not be forgiven until 25 years of participation • 20 and 25 year forgiveness options to be tax-free White House Budget Proposal Average Student Loan Debt Portfolio, 2014 Med Grad Loan Type Original Balance Rate Subsidized Stafford $17,000 6.800% Unsubsidized Stafford $155,00 6.522% Grad PLUS $24,700 7.528% Total $196,700 6.672% Loan Repayment Analysis Average Monthly Payoff Term Payment Scenario Total Spent Payment (months) PAYE and PSLF (today) $807 120 $96,893 PAYE and PSLF (proposal) Difference $1,216 $409 240 120 $291,829 $194,936 *Loan balances, rates, and payment information based on GL Advisor client data. Payment calculation assumptions can be provided upon request. Action Plan Consolidation: Evaluate and complete a consolidation with the Direct Loan Program. Income-Based Repayment / Pay As You Earn: Apply for and enter IBR or PAYE (during residency). Re-apply annually with income documentation and family-size verification. Manage Liquidity: Ensure you have sufficient cash flow to make all necessary loan payments. Manage Discretionary Income: Determine how to allocate extra cash to insurance, retirement, and other needs. Public Service Loan Forgiveness: Track eligible payments, maintain employment documentation. Tax Filing: Incorporate impact of taxes on federal loan subsidy programs when filing For more information and to schedule a complimentary personal consultation, please see John in the lobby after Orientation: [email protected] Main: 877.552.9907 All government sponsored programs are subject to their continued existence, availability and participation requirements. GL Advisor is a division of Graduate Leverage, LLC. GL Advisor currently does not offer all services to residents of North Dakota.