debt management for the real world kim siwarski access group and colleen macdonald simpletuition

Debt Management for theReal WorldKim Siwarski

Access Groupand

Colleen MacDonaldSimpleTuition

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)


Do you currently provide your students debt management

Information?


When do you provide Debt Management information?


Types of Students


Student Borrowing Breakdown


IncomeIncome Source Budgeted

Student Loans 1,818.00$

Job 1 -$

Total income 1,818.00$

ExpensesFinance Payments Budgeted

Credit card 48.00$

Auto loan -$

Total finance payments 48.00$

Fixed Expenses Budgeted

Rent 675.00$

Auto insurance -$

Medical insurance 158.00$

Cable TV 45.00$

Telephone 70.00$

Internet 30.00$

Investments/Savings -$

Utilities 50.00$

Total fixed expenses 1,028.00$

Variable Expenses Budgeted

Household 50.00$

Groceries 400.00$

Auto upkeep and gas -$

Clothing -$

Medical/prescriptions 25.00$

Entertainment 100.00$

Dining out/Fast Food 50.00$

Total variable expenses 625.00$

Totals Budgeted

Income 1,818.00$

Expenses 1,701.00$

Income less Expenses 117.00$

Student Borrows 100% of Loans Offered On Award Letter

Notes

Avg. UG Student Credit Card Debt was $2200*

#REF!

Notes

21816

Notes


Job 1 8,333.00$


ExpensesIncome Tax Withholdings Budgeted

Federal income tax 1,676.00$

State income tax 626.50$

FICA 637.48$

Medical See FICA

Social Security See FICA

SDI 91.66$

Total withholdings 3,031.64$

Finance Payments Budgeted

Credit card 200.00$

Auto loan 479.00$

Student Loans 1,060.00$

Total finance payments 1,739.00$


Rent 1,860.00$

Auto insurance 108.83$


Cable TV 45.00$

Telephone 75.00$

Internet 30.00$

Investments/Savings 250.00$

Utilities 50.00$



Household 50.00$

Groceries 600.00$

Auto upkeep and gas 130.00$

Other travel expenses -$

Clothing 100.00$




Total variable expenses 1,265.00$

Totals Budgeted

Income 8,333.00$

Expenses 8,522.47$

Income less Expenses (189.47)$

Budget Assumes the following: Student graduated and earns $100K per year Student moves to SF after graduation and opts to no longer have a roommate Students rewards her hard work by buying a new car Student was relatively responsible with her credit as a Grad student, total balances total $2500 Total Loans borrowed come to $80,724 (does not account for interest accumulated in school.)

0-$4,750=0%, $4,751-$7,000=10%, >$7,000=15%

0-$3,070=0%, $3,071-$5,960=1%, >$5,960=2%

Notes

1.18 % of Gross Wages

Monthly Budget at Graduation

$17K Sub, $24K Unsub, $39,724Grad PLUS

Notes

Student's outstanding credit card debt is $2500*

1.45% of Gross Wages

Notes


#REF!

#REF!

Notes


Student Loans 800.00$

Job 1 900.00$


ExpensesFinance Payments Budgeted

Credit card 48.00$

Auto loan -$

Total finance payments 48.00$


Rent 675.00$

Auto insurance -$


Cable TV 45.00$

Telephone 70.00$

Internet 30.00$

Investments/Savings -$

Utilities 50.00$



Household 50.00$

Groceries 400.00$

Auto upkeep and gas -$

Clothing




Total variable expenses 625.00$

Totals Budgeted

Income 1,700.00$

Expenses 1,701.00$

Income less Expenses (1.00)$

Budget assumes the following:

Student has no undergraduate student loan debt

Student creates a budget based on actual expenses of $1700/month

Student has one roommate

Student does not own a car

#REF!

Student Creates Personal Budget and Borrows Only What She Needs

Notes

Average Grad Student Credit Card Debt was $2200*

#REF!

Notes

Student works 15 hours per week @ $15/hour

20400

Notes


Job 1 8,333.00$


ExpensesIncome Tax Withholdings Budgeted

Federal income tax 1,676.00$

State income tax 626.50$

FICA 637.48$

Medical See FICA

Social Security See FICA

SDI 91.66$

Total withholdings 3,031.64$

Finance Payments Budgeted

Credit card 200.00$

Auto loan 479.00$

Student Loans 808.00$

Total finance payments 1,487.00$


Rent 1,860.00$

Auto insurance 108.83$


Cable TV 45.00$

Telephone 75.00$

Internet 30.00$

Investments/Savings 250.00$

Utilities 50.00$



Household 50.00$

Groceries 600.00$

Auto upkeep and gas 130.00$

Clothing 100.00$




Total variable expenses 1,265.00$

Totals Budgeted

Income 8,333.00$

Expenses 8,270.47$

Income less Expenses 62.53$

Budget Assumes the following: Student graduated and earns $100K per year Student moves to SF after graduation and opts to no longer have a roommate Students rewards her hard work by buying a new car Student was relatively responsible with her credit as a Grad student, total balances total $2500 Total Loans borrowed come to $62,400 (does not account for interest accumulated in school.)

Notes

0-$4,750=0%, $4,751-$7,000=10%, >$7,000=15%

0-$3,070=0%, $3,071-$5,960=1%, >$5,960=2%

Notes


Budget after Graduation 2

$17K Sub, $24K Unsub, $21400 Grad PLUS

Notes

Average Grad Student Credit Card Debt was $2500*

1.45% of Gross Wages


Notes

#REF!

#REF!

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


Examples Earnings with RepaymentFirst Year Public Sector Lawyer’s Salaries (Non-federal)

Occupation 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

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


Firm Size Median Salary*

Payment Loan

2-25 $68,000 $453 $39,35726-50 $81,000 $540 $46,916

51-100 $90,000 $600 $52,129101-250 $105,000 $700 $60,817251-500 $115,000 $766 $66,551

501+ $145,000 $966 $83,927

Examples Earnings with Repayment First Year Salaries For Associates at Private Firms

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


School Name Location School Type Starting

Median Salary Mid-Career

Median Salary Berklee College of Music Boston, MA Arts & Design $37,300 $66,300

Stanford University Stanford, CA

Private Research Universities $60,200 $119,000

Davidson College Davidson, NC Liberal Arts $42,100 $101,000 University of Georgia (UGA) Athens, GA Social $42,100 $78,400 Iowa State University Ames, IA State Schools $44,900 $83,500

Starting Salaries after Graduation A Glimpse at the Future

Source: http://www.payscale.com/best-colleges/top-colleges.asp


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


Standard 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

Extended Repayment• 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 ManagerGeneral PractitionerHistory ProfessorBoutique Small Firm Lawyer

Examples Careers

Investment BankerSurgeonEconomics ProfessorCorporate 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 pre-pay, 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

EntrepreneurPrivate PracticeBiotech Academic ResearcherSole Proprietor Private Practice Lawyer

Examples Careers

Non-profit ManagerDoctors without BordersState HistorianPublic Interest Lawyer

Compare the Options $60,000 Stafford Loan Balance

Options StandardRepayment

GraduatedRepayment

ExtendedRepayment

MonthlyPayment $690 $340 (2 yrs) $416$812 (8 yrs)

Repayment Period 10 years 10 years 25 years

TOTAL PAID $82,858 $86,118 $124,933

Assumptions: 6.80% fixed interest rate and No payment incentives


Questions?????

Kim SiwarskiDirector, External Sales and School Services: [email protected]

Colleen MacDonaldAssistant VP School Channel Sales:[email protected]

debt management for the real world kim siwarski access group and colleen macdonald simpletuition

Documents

real world slide

surveyssalary debt management

additional credit card

loan payment

life of loan

public defenders

private student loans

stafford loans