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Dental Students’ Finances: A Strategic Approach to Debt Management

Dental Students’ Finances: A Strategic Approach to Debt Management. Andrew Franger ASDA Eastern Regional. *Detailed assumptions are available upon request. Changes in Student Debt Levels. ~$190K. ~$115k. ~$50k. 1993. 2003. 2010. Debt levels have more than tripled in the last 17 years.

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Dental Students’ Finances: A Strategic Approach to Debt Management

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  1. Dental Students’ Finances: A Strategic Approach to Debt Management Andrew Franger ASDA Eastern Regional *Detailed assumptions are available upon request - Confidential Document, Property of Graduate Leverage, LLC -

  2. Changes in Student Debt Levels ~$190K ~$115k ~$50k 1993 2003 2010 Debt levels have more than tripled in the last 17 years * Based on data collected by ADEA and GL internal student database - Confidential Document, Property of Graduate Leverage, LLC -

  3. - Confidential Document, Property of Graduate Leverage, LLC -

  4. Agenda • Regulatory & Market Update • Federal Loan Opportunities and Strategies • Private Loan Opportunities • TWO PRIMARY OBJECTIVES: • Maximize your Liquidity • Lower the Cost of your Debt - Confidential Document, Property of Graduate Leverage, LLC -

  5. Regulatory & Market Update • New Income-Based Repayment (IBR) plan provides low payment and interest subsidies (July 1, 2009) • Budget Control Act of 2011 eliminates Subsidized Stafford loans for graduate students (July 1, 2012) • Improvements in private student loan markets may present opportunities for certain borrowers - Confidential Document, Property of Graduate Leverage, LLC -

  6. Impact of Subsidy Removal Debt Ceiling Legislation (Budget Act 2011) resulted in the following changes: • After 2012 Graduate Students will not receive subsidized Stafford Loans • Eliminates on-time payment incentives (rebate) *Based on borrowing $40,500 each year for 4 years of dental school. 10 Year Repayment term.

  7. Payment Reduction Options • Postpone Payments: • In-School Deferment:FULL SUBSIDY • Economic Hardship Deferment (EHD):FULL SUBSIDY • Forbearance:NO SUBSIDY • Significantly Reduce Payments: • Income-Based Repayment Plan (IBR):PARTIAL SUBSIDY • Limits payment to 15% of discretionary income (changes to 10% in 2014*) • Subsidized interest not covered by reduced payment is paid by government • Subsidy limited to 3 years • Extended Repayment Plans:NO SUBSIDY • Consolidation 30 year Term • Extended 25 year Term - Confidential Document, Property of Graduate Leverage, LLC -

  8. 3 Scenarios, 3 Strategies $190,000 of debt. (weighted interest rate 7.05%) Graduate A Graduate B Graduate C Salary: $40,000 $90,000 $90,000 Best Approach: IBR EHD IBR Payment: $47 $0 $322 Subsidy Savings: $2,296 $2,312 $1,706 Tax Savings : $73 $0 $398 Total Savings : $2,369 $2,312 $2,104 Liquidity, Tax Savings, & Subsidy Savings - Confidential Document, Property of Graduate Leverage, LLC - Based on current IBR Regulations as of July 1st 2009

  9. Other Benefits of Reduced Payment Structured Payment Strategy Targeted Repayment Standard Repayment Consolidation – 4.75% 4.75% Non-payment Loans Fixed Stafford Loan – 6.8% 6.8% Non-payment 8.5% Grad PLUS – 8.5% Non-pay Private Loan - 9.25% 9.25% Repayment Period 8 yrs 10 yrs 1/2 yrs 1 yrs 7 yrs 10 yrs $11,675 Effective Rate (APR) = 6.29% Effective Rate (APR) = 5.69% *Assumes $168,000 in federal debt and $8,000 in private loans - Confidential Document, Property of Graduate Leverage, LLC -

  10. Returns PLUS Loan 8.1% Average PLUS Return S&P 500 7.4% Average S&P Return (A/T) Should I Be Investing? 16% 8% 0% 1940 1960 1987 2001 Sources: Yale Econ/Robert Shiller, Standard & Poor’s, Federal Reserve, Bloomberg All Returns Here Are After Tax - Confidential Document, Property of Graduate Leverage, LLC -

  11. LIBOR, Prime, etc. Private Loan Market Update (For Illustrative Purposes Only – assumptions based on good credit & sample lenders) Private Loan Market Has Improved Historical Private Loans 10.9% % % Margin 7.9% Grad PLUS 7.5% 3% Margin 5.5% 4.9% Margin Index ? Margin Index Index Index During Credit Crisis Pre-Credit Crisis Current Interest Rates Increase? A Low Rate “Fixed” Option May Provide Significant Savings *Research conducted by GL - Confidential Document, Property of Graduate Leverage, LLC -

  12. Dental Student Action Plan • What every dental student with student loans should do: • Understand Your Debt • What kind of loans do I have? (Federal Stafford, GRAD Plus, Perkins, etc.) • Who is my lender? (Federal Direct, Federal through Private Lender, Non-Federal Private Lender) • What are the interest rates on my loans? (fixed, variable, 6.8%, 7.9%, 8.5%, etc.) • Prepare & File Taxes Advantageously • Preparation in fall of final year to understand tax implications for loan subsidy programs • Understand the trade-off of filing jointly with spouse • File taxes in final year as appropriate • Position Loans for Maximum Savings • Subsidy: Income, tax status, family size, career path, loan portfolio, and application timing impact which program will provide greatest benefit • Evaluate Refinancing opportunities • Initiate evaluation and preparation prior to graduation • Allocate additional funds appropriately • Only invest when returns exceed cost of debt and liquidity issues met • Understand implications of retirement accounts on subsidy programs - Confidential Document, Property of Graduate Leverage, LLC -

  13. Review Personalized Assessment Execute Debt Management Objectives • Overview • We have compiled and analyzed your personal debt portfolio in order to determine the optimal debt management strategy. The tasks outlined below include each step required to minimize your cost of debt. • Below your task list you will also find a detailing of the savings as well as your loan portfolio for your records. • Required Tasks To Achieve Plan Objective: • November 15, 2010:Consolidate all low rate loans as initial in-school application • February 15, 2011: Complete Add-on Consolidation application form to include all low rate loans occurred in spring disbursement • March 1, 2011: Verify in-school deferment status on all consolidated loans to prevent payment and ensure subsidy • March 20, 2010: Complete tax filing process according to specific filing status: i) • Non-Exempt: File using deductions for AGI to maximize subsidy and minimize Fill out Card 1 3 2 Complete Process Yourself Contact Info: afranger@gladvisor.com Cell: 847-894-2050 Main: 877-552-9907 Retain GL Advisor to Carry Out Process GL Advisor Can Help Support Process Personal Info Card within 1 week - Confidential Document, Property of Graduate Leverage, LLC -

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