1. Managing Your Loan Debt: Best Practices for SGU Veterinary Students
Presented by Jason DiLorenzo
Founder & Executive Director

2. Agenda Veterinary Graduate Economics Overview of Repayment options
Maximizing Federal Loan Forgiveness
Repayment and Forgiveness Case studies
Refinancing: When and Why
Developing an Action Plan
Q&A and Available Resources

3. Average Debt Levels ~$275k (2017 SGU) 2016 ~$168k (AVMA) 2007 ~$107k
2000
~$63k

4. Veterinarian Incomes

5. Types of Available Loans
Federal Loans: (Stafford, Grad PLUS)
Federal Stafford: Fixed Rate 6% (since July 1st 2017)
Unsubsidized: all interest accrues
Direct Graduate PLUS: Fixed Rate 7% (all interest accrues)
6 Month Grace Period from Graduation
Private Loans:
Generally not as competitive as federal loans for students
Interest rates vary, can be fixed or variable

6. Repayment Timeline Winter / Spring: Graduation, File Taxes Fall:
End of Grace Period on Stafford/Grad PLUS.
IDR Renewal every 12 Months / Review Profile and Legislative Changes
Fork in Road:
Forgiveness / Standard / Refinance

7. Repayment Options and Your Grace Period
Most recent graduates need payment relief
Standard, Graduated or Extended Term
MOST COSTLY! (The “F” Word)
Forbearance / Deferment
Available with attractive underwriting profile
More applicable at practice transition
Refinancing
15% / 20% of discretionary income, 25 year taxable forgiveness
IBR / ICR
10% of discretionary income, 20 year taxable forgiveness
Only available if no loans outstanding on Oct 1, 2007
PAYE / New IBR
10% of discretionary income, 25 year taxable forgiveness (graduate level)
50% of accruing interest not charged, no borrowing restriction
REPAYE
Explain each in detail!

8. $275,000 of debt @ 6.5% Starting salary $70k
Repayment Scenarios
$275,000 of 6.5% Starting salary $70k
Year:
1st Year nd Year rd Year
Previous Year AGI:
$ $35, $70,000
Standard Payment:
$3, $3, $3,123
Extended Payment:
$1, $1, $1,857
IBR Payment:
$ $ $641
PAYE and REPAYE:
$ $ $427

9. Taxes in final year and post-graduation:
File in your graduation year for the option of as low as a $0 payment
Married: Filing Jointly OR Filing Separately
Identification of other AGI deductions (e.g. moving expenses)
Qualified retirement plan contribution considerations
File a tax return in the year you graduate!

10. A “Tail” of Four Veterinarians: $275k Debt
Graduation
Year 1
Year 10
Year 20
Payment Plan
Monthly Payment
Sum of Payments
Forgiveness
Tax Liability
Total Out of Pocket Cost
Veterinarian A
6.5%
$70,000
$85,000
$115,000
10 Year Standard
$3.123
$375,000 $0
Veterinarian B
6.5%
$70,000
$85,000
$115,000
25 Year Extended
$1,857
$557,000 $0
Veterinarian C
6.5%
$70,000
$85,000
$115,000
Pay As You Earn (PAYE)
$0 to $517 to $694
$120,600
$513,000
$154,000
$274,600

11. Veterinarian D: REPAYE Example
Graduation
Year 1
Year 10
Year 25
Subsidy Benefit
Max Monthly Payment
Sum of Payments
Forgiveness
Tax Liability
Total Out of Pocket Cost
Veterinarian D
6.5%
$70,000
$85,000
$134,000
$122,700
$811
$166,500
$415,550
$124,700
$291,200
REPAYE is not always best for DVM’s

12. Other Loan Repayment Programs
Public Service Loan Forgiveness Program
Borrower must work for a public service entity as defined by program to be federal or state, defense or non-profit organization (University, CDC, USDA, FDA, etc)
Borrower must make 120 qualifying payments on a Federal Direct Loan
After 10 years in IBR/PAYE/REPAYE, entire balance would be forgiveness TAX-FREE
Graduates with higher than average debt may seek PSLF to increase effective salary
Veterinary Medicine Loan Repayment Program (VMLRP):
Borrower receives up to $25,000 per year for 3 years of service in a NIFA designated veterinarian shortage situation
Forgiveness is taxable
Understand Your Options!

13. Legislative Considerations
Reauthorization of HEA bill proposes elimination of federal forgiveness plans
PSLF participants expected to be grandfathered
Promissory notes contain language regarding PSLF availability
Changes only by act of Congress, but IDRs subject to Executive Orders
Detrimental Reliance
“I never would have gone to graduate school forgiveness wasn’t available”
Stay Abreast of Program Changes!

14. An Evolving Marketplace
Update Your Strategy Annually! The only constant is change…
Don’t Expect Servicers to Understand Your Strategy: Lack of advocacy, analysis and support exists across all federal servicers. Errors are rampant.
“Don’t Believe the Hype”: With PSLF now 10 years old, media reports are creating unnecessary alarm.
Update Your Strategy Anually!

15. A Veterinarian’s Fork In The Road
ACCELERATED PAYMENT/ REFINANCING
Private Sector
High Household Income
Federal Benefits not Needed
FORGIVENESS
PSLF
Taxable Loan Forgiveness
Payment Relief in Training

16. Case Study
Dr. D has been working for a private practice since graduation, and utilizing an IDR plan. After 7 years at average private starting salary, her income rises substantially after buying a practice. She no longer needs reduced payments or can achieve forgiveness:
Loan balance at graduation: $275,000
Balance after 7 years in PAYE: $371,500
Balance after 7 years in REPAYE : $323,250
Dr. D must now begin to pay back the entire balance. What is her best option to reduce her cost?
Refinance: Dropping her interest rate by 2% on a 15- year term can save over $52k in interest costs.

17. Private Refinancing: Determining Suitability
Opportunity:
Lending marketplace increasingly crowded and highly competitive
Transaction-focused, not consultative
Rates can be competitive, fixed as low as 3.5%
For graduates with $75k or less in federal debt, PSLF likely holds little value, refinancing may make sense
Considerations:
Loss of subsidy/forgiveness benefits on Federal education loans
Liquidity, as forbearance and deferment typically not allowed after refinancing
Origination and other fees may erode savings
Fixed vs. variable rate loan types have significant impact on long-term vs. short-term savings
Your time horizon for paying off the particular debt

18. Sample Budget: Fail to Plan, Plan to Fail!

19. Timeline Review and Consolidation
Winter / Spring:
Graduation, File Taxes
Fall:
End of Grace Period on Stafford/Grad PLUS
IDR Renewal every 12 Months / Review Profile and Legislative Changes
Fork in Road:
Forgiveness / Standard / Refinance

20. Thank YOU!
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