Presented
by:
Foresight
Capital
Management
Advisors
1
‐
877
‐
429
‐
4690
Laurie
Stegenga CPA,
PFS,
CFP®,
AIF®
[email protected]
Go
From
This…
Or
Six
‐
Figure
Topics
Workforce
Psychology
Understanding
your
Student
Debt
Options
Budgeting
101
for
the
Young
Professional
Generational
Workforce
Differences
Baby
Boomers
‐
Hierarchy
Millennials
‐
Network
Closed
Structure
Centralized
Rigid
Rules
and
Codes
Strategic
Decision
Makers
Open
structure
Decentralized
Flexible
Lack
of
Organization
No
Hierarchy
vs.
Amount
of
Savings
for
Retirement
It
is
estimated
that
10%
of
all
Work
Wages
should
be
saved
in
order
to
have
an
increased
likelihood
of
Investing
Requires
a
Hierarchy!
Centralized
Decision
Makers
Fixed
Investing
Principles
High
Organization
and
Planning
Listening
is
a
Requirement
Everything
cannot
Happen
Next
10
Years
‐
What
is
Critical?
Have
a
Budget
Stick
to
the
Budget
Slowly
grow
into
your
new
found
money
and
salary
“The
BMW
might
have
to
wait
a
few
years”
However,
the
Budget
needs
to
include
Reasonable
young
professional’s
life
style
with
Fun
and
Entertainment
built
into
it
Budget
‐
wise
vacations
(backpacking,
etc.)
Dinners
out
(progressive
dinner)
Long
weekends
Repaying
Your
Loans
TOPICS
1.
Interest
Rates
and
Payments
2.
Entering
Repayment
3.
Repayment
Incentives
4.
Repayment
Plans
Getting
Started
‐
Types
of
Loans
1.
Direct
or
Federal
Subsidized
Loans
2.
Direct
or
Federal
Unsubsidized
Loans
3.
Direct
or
Federal
PLUS
Loans
•
Direct
Loans
are
borrowed
from
and
repaid
directly
to
the
Federal
Government
•
Federal
Loans
are
borrowed
from
and
repaid
directly
to
a
bank
or
other
private
lender
How
Do
They
Affect
Me?
The
Major
Difference
between
the
types
of
Loans
is
how
Interest
is
Calculated.
Subsidized loans
‐
Federal
Government
pays
interest
while
you
are
enrolled
in
school
and
during
your
grace
period
Unsubsidized and
PLUS loans
‐
Borrower
is
responsible
for
paying
the
interest
starting
from
the
first
disbursement
date
GOAL:
Try
to
make
interest
payments
during
school
to
avoid
“Capitalization”
Interest
Rates
and
Payment
of
Interest
Subsidized
Loans
Unsubsidized
&
PLUS
Loans
Interest
paid
by
Government
while
1.
Enrolled
½
time
2.
Grace
period
3.
Certain
other
periods
(i.e.
deferment)
Borrower
is
responsible
for
paying
interest
1.
All
periods
(Starting
@
time
of
disbursement)
2
Options:
1.
Pay
interest
as
it
accrues
(while
in
school/grace
period)
2.
Let
interest
accrue
&
be
added
to
principal
balance
Capitalization
If
you
let
interest
accrue
on
Unsubsidized
and
PLUS
loans
it
is
added
to
your
principal
balance!
Increases
Loan
Principal
Balance
Pay
Interest
on
Increased
Loan
Principal
Balance
Total
Repayment
Amount
=
GREATER
Over
the
Life
of
Repayment
Difference
$48,480!
If
you
pay
the
interest
as
it
is
charged…
If
you
let the
interest
accrue…
Original
Loan
Amount
(37,500
for 4
Years)
$150,000
$150,000
Capitalized
Interest
for
48
months
(at
the
maximum
rate
of
7.9%)
$0
$33,322
Principal
to
be
Repaid
$150,000
$183,322
Monthly
Payment
(Standard
Repayment
Plan)
$1,810
$2,214
Number
of
Payments
120
120
Total
Amount
Repaid
$217,200
$265,680
Capitalization
Example
Fixed
vs.
Variable
Interest
Rates
First
Loan
Disbursement:
1.
On
or
After
July
1,
2006
Fixed
interest rates
remaining
through
life
of
loan
2.
Before
July
1,
2006
Variable
interest
rates
(Adjusted
each
year
on
July
1)
Subsidized
&
Unsubsidized
Loans:
•
Variable
interest
rate
≤
8.25%
PLUS
loans:
How
is
Interest
Calculated?
Interest
on
all
loans
borrowed
under
the
Department’s
federal
student
loan
programs
are
calculated
on
a
simple
daily
basis.
Source: Direct Loans on the Web:
Entering
Principal
Repayment
1.
Graduation
2.
Withdrawal
from
School
3.
Drop
Below
½
time
*
Note
:
PLUS
loans
do
not have
a
“Grace”
Period
*
Reminder
:
Unsubsidized
Loans
are
Charged
Interest
During
Grace
•
Two
Options:
1)
Pay
Interest
or
2)
Allow
Interest
to
Capitalize
Enter
“Grace”
Period
for
6
Months
Repayment
Period
Begins
1
Day
After
Grace
Period
Ends
Source: Exit Consulting Guide
6
Month
Grace
Period
Use
This
Time
WISELY!
Make
a
DYNAMITE
Résumé!
Interview,
Interview,
Interview!
Locate
Your
First
Job!
Use
This
Time
to
Get
Financially
Organized
Select
a
Repayment
Plan
Make
a
Budget
and
Stick
to
It!
Note: Interest is not charged on Subsidized loans and continues to capitalize on
Unsubsidized loans for the 6 month grace period
Repayment
Incentives
Direct
Loan
Program
Only
Automatic
Withdrawal
Payments
Have
your
payment
automatically
deducted
from
your
bank
account
and
receive
a
.25%
interest
rate
reduction!
Be
sure
to
make
all
of
your
payments
on
time!
The
first
twelve
are
critical
On
time
payments
could
result
in
an
interest
rebate!
You
will
be
contacted
by
your
loan
servicer
if
you
qualify
Contact
your
FFEL
lender
to
find
out
if
they
offer
incentives
too!
Source: Exit Consulting Guide
Repayment
Options
1.
Standard
Repayment
Plan
– 10
Years
Fixed
Payment
Default
2.
Graduated
Repayment
Plan
– 10
Years
Balloon
Payments
1.
Hint:
Select
Standard
but
pay
back
faster
on
your
own
3.
Extended
Repayment
Plan
– 25
Years
Fixed
or
Graduated
Payments
4.
Income
Based
Repayment
Plan
– 25
Years
Payment
Based
on
Income
(IBR).
Must
apply
every
year
can
use
alternative
W
‐
2
5.
Pay
as
You
Earn
– 20
Years
Payment
Based
on
Income
for
borrowers
beginning
after
Oct
1,
2011
(Pay
Earn)
6.
Loan
Consolidation
– 30
Year
Payments
Fixed
Rate
10
to
30
Years
to
Repay
Your
Loans!
Loan
Consolidation
Simplify
Loan
Repayment
into
one
Bill
to
one
Lender
Loan
Consolidation
Offers
Repayment
Periods
up
to
30
Years
Make
Lower
Monthly
Payments
by
S
‐
t
‐
r
‐
e
‐
t
‐
c
‐
h
‐
i
‐
n
‐
g
the
Repayment
Period
New
Fixed
Interest
Rate
is
a
Weighted
Average
of
the
Current
Loans (always
below
8.25%)
Income
Based
Repayments
can
continue
under
Consolidation!
If
you
already
have
Direct
loans
and
you
consolidate
you
may
lose
certain
repayment
incentives
such
as
automatic
withdrawal
interest
reductions
and
interest
rebates!
Hint:
Convert
FFEL
private
loans
into
“Direct”
loans
by
consolidating.
Also,
consolidate
your
FFEL,
Indirect,
and
PLUS
Loans
into
a
“Direct”
Consolidation
loan
it
will
make
you
eligible
for
public
service
debt
forgiveness
if
you
are
going
to
be
employed
for
at
least
10
years
(120
payments)
at
a
501(
c)(3)
organization.
Consult
a
financial
advisor
before
making
the
decision
to
consolidate!
Loan
Repayment
Plan
Types
Plan
Length
Payments
Additional
Information
1.
Standard
Repayment
Plan
10
years
• Fixed payment amount • Payment must be at least $50 per month2.
Graduated
Repayment
Plan
10
years
• Graduated payments increase every 2 years (payments must be greater thaninterest that accumulates between
payments)
Tailored to individuals starting out with
a relatively low income
You’ll ultimately pay more over the life
of the loan than the standard repayment
plan
3.
Extended Repayment
Plan
25
years
• Choice of Fixed OR Graduated payments *See qualifications for loan Monthly payment is less than the
Standard Plan, but you’ll pay more over
the life of the loan
4.
Income
‐
Based
Repayment
Plan
(IBR)
25
years
• Capped payment amount based upon income and family size• Payment = 15% of Discretionary Income • Possibility of having a portion of the
loan cancelled if requirements are met
• Eligible if your payments under IBR are less
than if Standard Repayment was used • If you work in public service and have
reduced loan payments the remaining
balance could be cancelled after 10 years
5. Pay
As
You
Earn
Repayment
Plan
20
years
• Capped payment amount based upon income and family size• Payment = 10% of Discretionary Income • A Possibility of having a portion of the
loan cancelled if requirements are met
• Only available to Direct Loans
• Must be a new borrower on or after Oct. 1,
2007, and must have received a Direct loan
on or after Oct. 1, 2011
Source: Exit Consulting Guide
www.direct.ed.gov www.studentaid.ed.gov
Studies
of
Debt
to
Income
for
Starting
Salaries
Approximate
Starting
Salary
Approximate
Debt
Load
Doctors
‐
$45,000
$166,750
MBA
Grads
‐
$90,000
$75,000
Lawyers
‐
$55,000
$78,616
Sources: hopkinsmedicine.org studentdoc.com
Source: legalnews.com Sources: usanews.com
How
is
IBR
‐
Income
Based
Repayment
Calculated?
Monthly
Payments
will
be
15%
of
Discretionary
Income.
Discretionary
Income
=
AGI
‐
150%
of
the
poverty
line
($16,755)
Example:
$45,000
Salary
=
$3,562
Annual
Debt
Payment
OR
Income
Based
Repayment
allows
for
affordable
debt
payments
while
you
build
your
career!
Income Based Repayment allows for efficient payoff of loans and an enjoyable
lifestyle for the Young Professional!
Note: Interest continues to build in early years of repayment!
Sample Medical Professional
First Year Budget
Estimated Student Loan
Amortization
Young
Professional
Budget
– 5
Years
into
Career
Congratulations
Discretionary
Income
Has
Special
Mortgages
for
Medical
and
Dental
Professionals
100%
Financing
No
PMI
‐
Private
Mtg Insurance
No
Origination
Fee
Favorable
Interest
Rates
‐
Doctors
of
Dental
Science
(DDS)
‐
Resident
Doctors
(MD)
‐
Doctors
of
Dental
Medicine
(DMD)
‐
Dental
surgeons
specializing
in
oral
and
maxillofacial
surgery
(MD)
‐
Doctors
of
Optometry
(OD)
‐
Doctors
of
Ophthalmology
(MD)
‐
Doctors
of
Podiatric
Medicine
(DPM)
Hint
For
married
couples,
file
separate
tax
returns
Otherwise,
spouses
income
is
considered
for
payment
Changing
Your
Repayment
Plan
Contact
Loan
Holder
Servicer
1.
Direct
Loans
Change
repayment
plan
ANY
time
Maximum
repayment
period
under
new
plan
must
be
longer
than
the
current
repayment
plan
2.
Federal
Education
Loans
Change
repayment
plan
ONE
time
PER
Year
Source: Exit Consulting Guide www.direct.ed.gov
Flexible!
Important
Notes!
You
may
prepay
all
or
part
of
your
loan(s)
at
any
time
without
a
penalty.
After
you
begin
repayment,
any
extra
amount
paid
over
your
required
amount
will
reduce
your
outstanding
principal
balance.
(Not
suggested
for
IBR
or
Pay
Earn)
Your
credit
history
will
be
affected
if
you
do
not
repay
your
loans
in
accordance
with
your
repayment
plan!
However
if
you
select
a
25
yr
IBR
or
20
yr
Pay
Earn
payback,
after
the
loan
time
period,
the
remaining
balance
is
Forgiven
in
most
Direct
Federal
programs!
What
If
a
Life
Event
Renders
me
Unable
to
Pay
my
Loans?
Deferment
A
period
in
which
repayment
of
the
principal
balance
is
temporarily
postponed
if
you
meet
certain
requirements
During
deferment,
the
government
pays
interest
on
subsidized
loans
For
unsubsidized
and
PLUS
loans,
the
borrower
is
responsible
for
paying
interest
as
it
accrues
during
the
deferment
period.
Forbearance
A
forbearance
allows
you
to
postpone
or
reduce
your
monthly
payments
for
reasons
such
as
financial
hardship
or
illness.
You
are
responsible
for
paying
the
interest
that
accrues
during
the
forbearance
on
all
loans,
including
subsidized
.
Be
Proactive!
Always
communicate
with
your
loan
Servicer
Public
Service
Loan
Forgiveness
Program
(PSLFP)
Loan
forgiveness
of
remaining
loan
balance
as
a
public
service
employee
Eligibility
Be
a
full
‐
time
public
service
employee
@
a
qualified
public
service
organization
Make
120
on
time
monthly
loan
payments
(10
years)
Payment
plans
(IBR
or
Pay
Earn)
Not
include
payments
while
loans
are
“in
‐
school”
status,
in
grace
period,
or
in
a
deferment
or
forbearance
program
Eligible
Loans
under
PSLFP
Federal
Direct
Loans
Consolidate
FFEL
loans,
Perkins
loans,
or
any
other
student
loans
into
Direct
Consolidation
Loan
first!
After
120
payments
at
a
public
service
organization
Submit
PSLFP
application
What
Qualifies
as
Public
Service?
Any
federal,
state,
or
local
government
agency,
entity,
or
organization
or
a
non
‐
profit
organization
that
is
tax
‐
exempt
by
the
Internal
Revenue
Service
(IRS)
under
section
501(c)(3)
of
the
Internal
Revenue
Code
(IRC).
The
type/nature
of
employment
does
not
matter
The
type
of
services
that
are
provided
by
the
organization
does
not
matter
for
PSLFP
purposes
A
private
non
‐
profit
employer
that
is
not
a
tax
‐
exempt
organization
under
Section
501(c)(3)
of
the
IRC
can
qualify
as
a
public
service
organization
if
it
provides
specified
public
services
Teacher
Loan
Forgiveness
Programs
A
portion
of
loan(s),
up
to
$17,500
under
Direct
Loan
Program
or
FFEL
program
after
Oct
1,
1998,
may
be
forgiven
Teach
full
‐
time
for
5
consecutive
years
Low
‐
income
elementary
or
secondary
school
OR,
Low
‐
income
educational
service
agency
and
meet
certain
other
qualifications
Seek
preapproval
from
school
facilities
and
loan
services
to
Tax
Benefits
for
Education
Tax
Credit
– Reduces
Your
Amount
on
Income
Taxes
American
Opportunity
Credit
Hope
Tax
Credit
Lifetime
Learning
Tax
Credit
Tax
Deduction
– Reduces
Your
Taxable
Income
College
Tuition
and
Fees
Deduction
How
Does
Foresight
Help
You
at
This
Point
in
Your
Career?
Foresight
is
a
Fee
‐
only
Registered
Investment
Advisor
who
has
a
Fiduciary
Responsibility
to
act
in
their
clients
best
interest.
We
do
not
accept
any
fees
or
compensation
based
on
product
sales
We
will
complete
a
Debt
Review
and
Analysis
of
your
Loans
Prepare
a
Debt
Repayment
Comparison
of
your
situation
and
suggest
a
plan
that
fits
your
needs
Complete
a
Budget
that
works
for
your
unique
inputs
Ultimately
guide
you
to
financial
independence
and
investing
for
your
future!
If
you
are
interested
in
pursuing
our
assistance
please
contact
us
at
1
‐
877
‐
429
‐
4690
or
[email protected]
Special
Items
to
look
into
Emergency
management
Military
service
Public
safety
Law
enforcement
services
Public
health
services
Public
education
or
public
library
services
School
library
and
other
school
‐
based
services
Public
interest
law
services
Early
childhood
education
Public
service
for
individuals
with
disabilities
and
the
elderly
Red
Cross
Teacher
Loan
Forgiveness
Programs
A
portion
of
loan(s)
under
Direct
Loan
Program
or
FFEL
program
after
Oct
1,
1998
are
forgiven
Teach
full
‐
time
for
5
consecutive
years
Low
‐
income
elementary
or
secondary
school
OR,
Low
‐
income
educational
service
agency
and
meet
certain
other
qualifications
Must
not
have
any
outstanding
balance
on
a
Direct
Loan
or
Loan
Terminology
Deferment
A period in which repayment of the principal balance is temporarily postponed if you meet certain
requirements.
Forbearance
Allows borrower to postpone or reduce monthly payment amount if temporarily unable to make
payments.
Loan
$ Borrowed from lending institution/Department
Grace Period
~ 6 Month period after
Graduation Leave school
Drop below ½ time
Master Promissory Note (MPN)
Binding legal document signed saying you will repay the loan(s)
Contains rights and responsibilities of the borrower
Lender
Bank, Credit Union, or other lending institution (for FFEL); or the Department (for Direct Loans)
Loan Servicer
Organization that handles billing and other servicing functions on behalf of lender
National Student Loan Data System (NSLDS)
Department’s central database for student aid
Sources
Doctor avg debt –http://www.studentdoc.com/medical‐school‐loans.html
Lawyer avg debt –http://www.legalnews.com/jackson/1191253
Lawyer avg salary ‐http://www.payscale.com/research/US/Job=Attorney_%2F_Lawyer/Salary
MBA avg debt‐http://management.fortune.cnn.com/2011/08/18/have‐b‐schools‐become‐debtors‐prisons/
MBA starting salary ‐http://www.mymbacareer.com/mba‐facts/mba‐salary.html
Types
of
Student
Loans
Type
Who
is
Eligible?
Interest Description
Subsidized Loans 1. Undergraduate 2. Graduate 3. Professional *With financial need
Federal Government Pays interest while:
1. Borrower is enrolled in school at least ½ time 2. In Grace Period
3. In Deferment period
Unsubsidized Loans 1. Undergraduate 2. Graduate 3. Professional
*Not required to have financial need
Borrower is responsible for paying all interest starting from the
date the loan is disbursed
PLUS Loans 1. Graduate 2. Professional
3. Parent(s) of Dependent Undergraduate
Borrower is responsible for paying all interest starting from the
date the loan is disbursed
Consolidation Loans 1. Undergraduate 2. Graduate 3. Professional 4. Parent(s)
Varies
Loan
Consolidation
Pros
Cons
Simplify
loan
repayment
into
one
bill
Lower
monthly
payments
by
having
up
to
30
years
to
repay
loan
Switch
variable
interest
rate
to
fixed
interest
rate
Costly
Extend
repayment
Make
more
payments
Pay
more
in
interest
Possible
loss
of
borrower
benefits
offered
with
original
loan
Interest
rate
discount
Principal
rebate
Some
loan
cancellation
Before
you
Consolidate
1.
Review
your
current
federal
student
loans
www.nslds.ed.gov
(if
unsure
about
who
your
lender
is)
2.
Determine
your
current
monthly
payment
amounts
Contact
servicer
to
receive
exact
figures
3.
Determine
your
monthly
payment
amount
if
you
consolidate
Use
direct
loan
consolidation
online
calculator
Call
Direct
Loan
Consolidation
Center
4.
Decide
if
you
will
consolidate
Monthly
loan
payment
difference
Length
of
repayment
Alternatives:
1.
Re
‐
evaluate
your
budget
and
income
situation
What
Loans
can
be
Consolidated?
Once
Loans
are
consolidated,
they
cannot
be
removed
The consolidated loans are paid off and no longer exist
Most
Federal
Student
Loans
Direct Subsidized Direct Unsubsidized
Subsidized Federal Stafford Loans Unsubsidized Federal Stafford Loans Direct PLUS Loans
PLUS loans from FFEL Program
Supplemental Loans for Students (SLS) Federal Perkins Loans
Federal Nursing Loans
Health Education Assistance Loans Some existing consolidation loans
Private
education
loans
are
not
eligible
for
consolidation
