Debt Management for the
Real World
Kim Siwarski
Access Group
and
Colleen MacDonald
SimpleTuition
Agenda
• Starting Debt Management at Enrollment
– Helping the Responsible Borrower
– Helping the Not so Responsible Borrower
• The Importance of Creating a Budget
• Understanding How Decisions of Today
Alter Your Financial Future
• Beyond Exit Counseling
Debt Management for the Real World
Debt Management
Early and Often
• Financial worries distract from education
• Average undergrad student loan debt is now
$20,000+
• 1 in 3 recent grads have additional credit card
debt of $ 10,000 or more
• Poor credit scores contribute to much higher
payments on private student loans, decreased
employment opportunities
Source: Decision Partners Financial Literacy 101 webinar (2009)
Debt Management for the Real World
Do you currently provide your
students debt management
Information?
Yes
75.6%
No
24.4%
Debt Management for the Real World
When do you provide Debt
Management information?
Debt Management for the Real World
Types of Students
Debt Management for the Real World
Student Borrowing Breakdown
Loan Type
Total
Outstanding
Debt
Prior Borrowing
History
Perkins Loan
Total Paid
Amount paid
over life of
in interest
loan (includes interest) only
$0
$0
$0
$0
Stafford Loans
$41,000
$472
$56,620
$15,620
Grad PLUS
$48,214
$598
$71,734
$23,520
$0
$0
$0
$0
$89,214
$1,070
$128,354
$39,140
$0
$0
$0
$0
Stafford Loans
$20,500
$271
$32,481
$11,981
Grad PLUS/Private
Anticipated Totals
for 10-11
$13,970
$169
$20,251
$6,281
$34,470
$440
$52,732
$18,262
$123,684
$1,510
$181,086
$57,402
Private
Totals to date
Perkins Loan
2010-11
Anticipated
Loan Debt
Current est.
monthly
payment
New Total
Repayment
Debt Management for the Real World
Student Borrows 100% of Loans Offered On Award Letter
Income
Budgeted
Income Source
Student Loans
$
Job 1
$
Total income
Notes
1,818.00
-
$
1,818.00
Expenses
#REF!
Budgeted
Finance Payments
Notes
Credit card
$
48.00
Auto loan
$
-
$
48.00
Total finance payments
Budgeted
Fixed Expenses
Avg. UG Student Credit Card Debt was $2200*
Notes
Rent
$
675.00
Auto insurance
$
-
Medical insurance
$
158.00
Cable TV
$
45.00
Telephone
$
70.00
Internet
$
30.00
Investments/Savings
$
-
Utilities
$
50.00
$
1,028.00
Total fixed expenses
21816
Monthly Budget at Graduation
Income
Budgeted
Income Source
Job 1
Total income
Notes
$
8,333.00
$
8,333.00
#REF!
Expenses
#REF!
Budgeted
Income Tax Withholdings
Notes
1,676.00 0-$4,750=0%, $4,751-$7,000=10%, >$7,000=15%
Federal income tax
$
State income tax
$
626.50
0-$3,070=0%, $3,071-$5,960=1%, >$5,960=2%
FICA
$
637.48
6.2 % of Gross Wages
Medical
See FICA
Social Security
See FICA
SDI
Total withholdings
1.45% of Gross Wages
$
91.66
$
3,031.64
Budgeted
Finance Payments
Notes
Credit card
$
200.00
Auto loan
$
479.00
Student Loans
$
1,060.00
$
1,739.00
Total finance payments
Budgeted
Fixed Expenses
1.18 % of Gross Wages
Student's outstanding credit card debt is $2500*
$17K Sub, $24K Unsub, $39,724Grad PLUS
Notes
Rent
$
1,860.00
Auto insurance
$
108.83
Medical insurance
$
68.00
Cable TV
$
45.00
Telephone
$
75.00
Internet
$
30.00
Investments/Savings
$
250.00
3% of gross earnings
Student Creates Personal Budget and Borrows Only What She Needs
Income
Income Source
Budgeted
Notes
Student Loans
$
800.00
Job 1
$
900.00
$
1,700.00
Total income
Student works 15 hours per week @ $15/hour
20400
#REF!
Expenses
#REF!
Finance Payments
Budgeted
Notes
48.00 Average Grad Student Credit Card Debt was $2200*
Credit card
$
Auto loan
$
-
$
48.00
Total finance payments
Fixed Expenses
Budgeted
Notes
Rent
$
675.00
Auto insurance
$
-
Medical insurance
$
158.00
Cable TV
$
45.00
Telephone
$
70.00
Internet
$
30.00
Investments/Savings
$
-
Utilities
$
50.00
$
1,028.00
Total fixed expenses
Budget after Graduation 2
Income
Income Source
Job 1
Total income
Budgeted
Notes
$
8,333.00
$
8,333.00
#REF!
Expenses
#REF!
Income Tax Withholdings
Budgeted
Notes
1,676.00 0-$4,750=0%, $4,751-$7,000=10%, >$7,000=15%
Federal income tax
$
State income tax
$
626.50
FICA
$
637.48
Medical
See FICA
Social Security
See FICA
SDI
Total withholdings
6.2 % of Gross Wages
1.45% of Gross Wages
$
91.66
$
3,031.64
Finance Payments
0-$3,070=0%, $3,071-$5,960=1%, >$5,960=2%
Budgeted
1.18 % of Gross Wages
Notes
Credit card
$
200.00 Average Grad Student Credit Card Debt was $2500*
Auto loan
$
479.00
Student Loans
Total finance payments
$
808.00
$
1,487.00
Fixed Expenses
Budgeted
Notes
Rent
$
1,860.00
Auto insurance
$
108.83
Medical insurance
$
68.00
Cable TV
$
45.00
Telephone
$
75.00
Internet
$
30.00
Investments/Savings
$
250.00
Utilities
$
50.00
$
2,486.83
Total fixed expenses
$17K Sub, $24K Unsub, $21400 Grad PLUS
3% of gross earnings
Beyond Exit Counseling
• Market workshops to your students
– It’s all in the Title
• Money Attitude (Towson University)
• Dollars and Sense (Cal State- Northridge)
• Red to Black (Texas Tech)
• Cash Course (State University at Buffalo)
• How to Make School Cheaper (Monterey
Institute)
– Communicating benefits
– Survey students to find out what is important
• What are you doing?
Debt Management for the Real World
Make It Meaningful: Use Salaries
• Why to use them
– Helps students with their financial realities
– May affect job choice
• Where to get them
–
–
–
–
Career Development Office’s Employment Report
www.careeroverview.com/salary-benefits.html
www.salary.com
www.payscale.com/research/US/All_People_in_
All_Surveys/Salary
Debt Management for the Real World
Examples Earnings with Repayment
First Year Public Sector Lawyer’s Salaries (Non-federal)
Median
Salary*
Payment
Loan
Civil Legal Services
$36,000
$240
$20,851
Public Defenders
$43,300
$288
$25,022
Local Prosecutors
$43,900
$292
$25,369
State Attorneys Gen’l
$46,400
$309
$26,846
Public Interest Orgs.
$40,000
$266
$23,110
Occupation
Source: NALP 2007 Public Sector and Public Interest Attorney Salary report.
http://www.nalp.org/press/details.php?id=63. Loan payment based on 6.8%
term for 10 years at 8% of gross salary
Debt Management for the Real World
Examples Earnings with Repayment
First Year Salaries For Associates at Private Firms
Firm Size
2-25
26-50
51-100
101-250
251-500
501+
Median
Salary*
$68,000
$81,000
$90,000
$105,000
$115,000
$145,000
Payment
Loan
$453
$540
$600
$700
$766
$966
$39,357
$46,916
$52,129
$60,817
$66,551
$83,927
Source: NALP 2007 Public Sector and Public Interest Attorney Salary report. http://www.nalp.org/press/details.php?id=63.
Loan payment based on 6.8% term for 10 years at 8% of gross salary
Debt Management for the Real World
Starting Salaries after Graduation
A Glimpse at the Future
School Name
Berklee
College of
Music
Location
School Type
Boston, MA
Arts & Design
Private
Research
Stanford, CA Universities
Stanford
University
Davidson
College
Davidson, NC Liberal Arts
University of
Georgia (UGA) Athens, GA Social
Iowa State
University
Ames, IA
State Schools
Source: http://www.payscale.com/best-colleges/top-colleges.asp
Debt Management for the Real World
Starting
Mid-Career
Median Salary Median Salary
$37,300
$66,300
$60,200
$119,000
$42,100
$101,000
$42,100
$78,400
$44,900
$83,500
Relating to Archetypes
• Discuss Loan Repayment options by Types
of Jobs Post Enrollment
– May lessen the anxiety by depersonalizing
choices
– Draws from shared experiences & uses
common themes
Debt Management for the Real World
Standard Repayment
Extended Repayment
• Pays based on the
lender/servicer payment
schedule.
• May benefit from borrower
incentives, but did not
count on them.
• Plans to pay on time,
assuming minimum
monthly payment over the
entire life of loan
• Wants to pay the least
amount of interest as
possible
• Is willing to request
extended repayment.
• A Person who will
prepay
• Understands
prepayment on highest
interest rate loans first.
Examples Careers
General Manager
General Practitioner
History Professor
Boutique Small Firm Lawyer
Debt Management for the Real World
Examples Careers
Investment Banker
Surgeon
Economics Professor
Corporate Lawyer
Graduate Repayment
• A Person who needs the
lowest payment possible at
the beginning.
• Assumes their income will
increase dramatically within 5
years of graduation.
• Is willing to consolidate to
minimize monthly repayment.
• If ever in a position to prepay, will plan to at that time.
Income Based Repayment
• Qualifies based on 15% of his
or her household AGI above
150% of the poverty line for
his or her family size.
• Assumes they will meet the
criteria for Loan Forgiveness
because they will work
qualifying employer for 10
years.
• Knows that they are good at
annual paperwork and
documentation.
Examples Careers
Entrepreneur
Private Practice
Biotech Academic Researcher
Sole Proprietor Private
Practice Lawyer
Debt Management for the Real World
Examples Careers
Non-profit Manager
Doctors without Borders
State Historian
Public Interest Lawyer
Compare the Options
$60,000 Stafford Loan Balance
Options
Monthly
Payment
Repayment
Period
TOTAL PAID
Standard
Repayment
Graduated
Repayment
$340 (2 yrs)
$812 (8 yrs)
Extended
Repayment
10 years
10 years
25 years
$82,858
$86,118
$124,933
$690
$416
Assumptions: 6.80% fixed interest rate and No payment incentives
Debt Management for the Real World
Questions?????
Kim Siwarski
Director, External Sales and School Services:
ksiwarski@accessgroup.org
Colleen MacDonald
Assistant VP School Channel Sales:
cmacdonald@simpletuition.com