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    • Lifetime Money Management University of California, Davis School of Veterinary Medicine Thursday, November 20, 2003 Donald Klingborg, DVM Christine Milligan, SVM
      • The value of your UCD DVM degree
      • The cost of a UCD veterinary med education
      • Financial aid & student loan information
      • Personal finance tips
      Agenda
    •  
      • + Income - Expenses
      • Working Hard Loans
      • Working Smart Costs of Life style
      • = Savings & Investments = Options
      • Many Purchases Big Homes Kid’s Education
      • Fun Activities Fast Cars Exotic Vacations
      • Retirement Family Cool Clothes
      Money
    • Average Starting Compensation for Entering Class of 2003 Graduates in 2007 (UC Davis SVM ’03 )
    • Who do You Believe? ’99 AVMA vs. Vet Econ
    • ’ 99 & ’01 SA, LA, EQ DVM Median Income (AVMA ’01, ’03)
    • Point-in-Time Earnings ’96 Vet Economics data 45% > $100,000 1/3 > $180,000
    • Income-- DVM vs. Board Certified Specialist Median Income (AVMA ’01, ’03)
    • ’ 01 Median Income by Years in Profession (AVMA ’03)
    • Veterinarian Salaries (’98 Practice Audit)
    • The Cost of Your Education
      • Estimate your total expenses
        • tuition & fees
        • books & supplies
        • rent
        • food
        • clothing
        • transportation
        • personal expenses
        • “ other” expenses
    • Cost of a UCD DVM Degree (Class of 2007)
      • Year 1 $ 30,371
      • Year 2 $ 32,608
      • Year 3 $ 33,700
      • Year 4 $ 38,690
      • Total $135,369
      Assumes annual increases of 5% for current financial aid expense budgets
    • Projected Average Loan Indebtedness Assumes $18,500 borrowed per year at UCD SVM
    • Two words of comfort when going to college . . .
      • Financial Aid
    • 3 x Two words of danger when going to college . . .
      • Credit Cards
      • Pizza & Beer
      • Financial Aid
    • The Financial Aid Equation Budget or estimated cost of attendance - E xpected student contribution = E stimated Financial Need & eligibility for financial aid
    • How to Re-Apply for Financial Aid
      • Must re-apply every year using the Free Application for Federal Student Aid (FAFSA)
      • Renewal applicants’ PINs are mailed in December (if applied for 03-04 aid)
      • New applicants apply on-line at: http://www.fafsa.ed.gov /
        • Gift aid and subsidized loans are limited . . . apply in January 2004
    • How to Re-Apply for Financial Aid
      • Student Aid Report (SAR) sent to student & school approximately 1 month after submitting FAFSA
      • Vet Med and other grads are considered “independent”
        • However , parental financial information must be reported on FAFSA to be considered for Federal Health Profession Loan
    • Three Types of Financial Aid
      • Grants (gift aid) - based on need
        • UCD SVM Fee Grants & UCD Grants
      • Scholarships (gift aid) - merit-based, etc.
        • UCD SVM Scholarships
      • Loans
        • Perkins Loan
        • Direct Loan (subsidized & unsubsidized)
        • Health Professions Student Loan
        • Private (alternative) Loan
        • UCD SVM Student Loan Program
      • Depending on financial need, students may receive more than one type of aid
    • Loan Deferments
      • No principal and/or interest payment required
        • Deferment forms available from loan servicer
        • Loans from previous schools? Request in-school deferment forms
      • In-school full-time (while in school)
      • In-school half-time (no limit)
      • Unemployed (3 year limit)
      • Economic hardship (3 year limit)
    • Loan Forbearance
      • Loan forbearance is a temporary postponement or reduction in payments
      • YOU must request & complete form available from lender or servicer
      • Forbearance is a means to avoid delinquency, default, or a bad credit rating
      • But . . . interest accrues during forbearance and the original repayment period is not extended
    • Cancellation of Your Loan
      • If you become totally and permanently disabled after loans are taken… or
      • Upon your death
    • Before you borrow . . .
      • There may be ways to reduce your costs so you don’t have to borrow as much
      • You can apply for a loan anytime throughout the school year (but within 8 weeks before the end of the year)
      • Here are some tips that may help you reduce the amount you have to borrow...
    • Saving Tips
      • Buy used books
      • Use only one credit card
      • Pay off credit card balance every month
      • Take advantage of free activities (biking, lectures, tennis, reading, hiking, etc.)
      • Get a roommate
      • Cook your meals
    • Saving Tips
      • Clean your apartment to get your deposit back
      • Use email instead of long distance calls
      • No cell phone, call waiting, cable TV, DS/T1 line, pager
      • Use the library
      • Sign up for utility’s balanced payment plan
      • Negotiate your rent
      • Keep your pets to a minimum
    • Credit Cards . . .
      • There are 1 billion cards in circulation; nearly 4 cards for every US citizen
      • 70% of all card holders carry a revolving balance every month, paying min. amt. due
        • Example:
          • $1,000 debt
          • pay minimum amount due every month (2% or $10
          • will take 19 years to pay off $1,000 and cost $1,900 in interest ($2,900 total cost of $1,000 purchase)
      • Pay off credit card debt, then pay off balance each month
      Danger Zone
    • Increase Income
      • Get a Job!
      • Summer
      • SWEP : www.cvma.net
      • School Year
      • UCD Student Employment Center: http://jobs.ucdavis.edu
      • UCD Human Resources: http://www.hr.ucdavis.edu
      • Other
    • Let’s look at a real life case . . .
      • Student just graduated from UCD’s School of Veterinary Medicine and borrowed $74,000 in subsidized and unsubsidized Direct Loans (maximum for all 4 years)
      • What are his/her options? First job pays $60,000 and making payments under the Standard payment plan*?
        • *Standard payment plan: fixed monthly amount, 10 years maximum
    • Worse Case Gross income $60,000 $5,000 Annual Monthly - Less Taxes & soc. sec (33%) $19,800 - $ 1,650 Rent -$ 1,000 Food (in & restaurant) (~$20/day) -$ 600 Utilities -$ 150 Telephone -$ 75 Student loan repayment (under standard plan) -$ 908 Car (payment, insurance, gas, maintenance) - $ 250 Clothes, personal, gifts, etc. -$ 100 Recreation, bad habits, etc. -$ 50 Total expenses - $ 4,783 Difference (discretionary income) $ 217 Student borrowed $74,000 for a DVM degree at UC Davis.
    • Worse case Gross income $60,000 $5,000 Annual Monthly - Less Taxes & soc. sec (33%) $14,850 $ 1,238 Rent $ 1,000 Food (in & restaurant (~$20/day) -$ 600 Utilities $ 150 Telephone $ 75 Student loan repayment (under standard plan) $ 908 Car (payment, insurance, gas, maint.) $ 250 Clothes, personal, gifts, etc. $ 100 Recreation, bad habits, etc. $ 50 Total expenses $ 4,783 Difference (discretionary income) $ 217 (<5%) Student borrowed $74,000 for a DVM degree at UC Davis.
    • Worse case Gross income $60,000 $5,000 Annual Monthly - Less Taxes & soc. sec (33%) $19,800 - $ 1,650 Rent $ 1,000 Food (in & restaurant) (~$20/day) -$ 600 Utilities $ 150 Telephone $ 75 Student loan repayment (under standard plan) $ 908 Car (payment, insurance, gas, maint.) $ 250 Clothes, personal, gifts, etc. $ 100 Recreation, bad habits, etc. $ 50 Total expenses $ 4,783 Difference (discretionary income) $ 217 Student borrowed $74,000 for a DVM degree at UC Davis.
    • Worse case Gross income $60,000 $5,000 Annual Monthly - Less Taxes & soc. sec (33%) $19,800 - $ 1,650 Rent $ 1,000 Food (in & restaurant) (~$20/day) -$ 600 Difference (discretionary income) $ 217 Student borrowed $74,000 for a DVM degree at UC Davis.
    • Worse case Gross income $60,000 $5,000 Annual Monthly - Less Taxes & soc. sec (33%) $19,800 - $ 1,650 Rent $ 1,000 Food (in & restaurant) (~$20/day) -$ 600 Equals One Steve’s Medium Pizza daily for 30 days, no beverages, no other food = Food available for 33% of your breakfast, lunch, and dinner meals Difference (discretionary income) $ 217 Student borrowed $74,000 for a DVM degree at UC Davis.
    • Cost of Borrowing Direct Loan Monthly Repayment Schedule
      • Loan Amount # Payments Payment Total
      • $10,000 120 $122 $14,640
      • $20,000 120 $245 $29,400
      • $30,000 120 $368 $44,160
      • $40,000 120 $491 $58,920
      • $50,000 120 $613 $73,560
      • $60,000 120 $736 $88,320
      • $70,000 120 $859 $103,080
      • Assumes Standard 10 year repayment schedule at capped rate of 8.25% ($122.43 per month per $1,000 @ 8.25%)
      • 25-30 year repayment schedules lower monthly payments and increase interest costs
    • Disposable Income vs. Debt ( 33% to taxes/withholding)
    • Instead of the Direct Loan standard loan payment, you can request:
      • Income Sensitive Repayment
          • pay interest only for 1 year (may reapply for up to 5 years)
      • Graduated Repayment
          • payments increase every 2 years up to 30 years
    • Instead of the Direct Loan standard loan payment, you can request:
      • Extended Repayment**
        • 12 - 30 years pay plan, based on amount borrowed
      • Income Contingent**
        • pay 4% of income first 5 years, up to 25 years
      ** Extended and Income Contingent repayment options are currently available for Direct Loans only
    • Monthly Payments go Down With Longer Repayment Periods & Lower Interest Rates Monthly Payments per $10,000
    • Interest Paid Increases with Longer Terms Summary per $10,000 @ 8%
    • Interest Paid Increases with Longer Terms & Higher Rates Total Interest per $10,000
    • If you don’t repay your loan . .
      • Lose your deferment and forbearance options
      • May not be eligible for further financial aid
      • Academic transcripts may be withheld
      • You will be reported to credit bureau, damaging your credit record
      • Your federal and state tax refunds may be garnisheed
      • Your employer may withhold part of wages
      • Your car and other possessions may be repossessed and sold to pay your loans
    • Borrowing is scary business, but . . .
      • A loan is an investment in you and your future
      • The terms and repayment options are very attractive and sensitive to the needs of students
      W ith deferments, forbearance, consolidation, and up to 5 repayment options, there is no reason for any student to become delinquent or go into default on her/his student loan.
    • Federal Loan Consolidation
      • Consolidate all federal educational loans into one new loan and lower monthly payments
      • Only one payment each month
      • Up to 30 years to repay
      • Interest either:
        • a) weighted average of all loans or
        • b) variable rate with a cap of 8.25% (contact lender)
      • No fees to consolidate
      • No penalty for early payment for any loans
      • Website: http://loanconsolidation.ed.gov
    • Helpful Web Sites
      • FAFSA on the Web: http://www.fafsa.ed.gov/
      • Your PIN #: www.pin.ed.gov
        • To electronically sign your FAFSA
        • To access your student loans
      • Direct Loans: http://www.ed.gov/DirectLoan/
      • UCD Graduate Financial Aid Office
        • http://faoman.ucdavis.edu/gradfao.htm
      • National Student Loan Data System (NSLDS)
        • www.nslds.ed.gov
      • Loan Consolidation: http://loanconsolidation.ed.gov
      • Alternative Loans: http://www.estudentloan.com
    • 10 Tips After You Graduate
      • Continue to live like a student
      • Transfer at least 10% of your gross salary from paycheck to savings
      • Contribute to a 401(k) or IRA - to the max.
      • Buy used cars
      • Buy no-load mutual funds
    • 10 Tips After You Graduate
      • Pay off loans as soon as possible
      • If you have children, give them the best education
      • Live minimally but take care of your stuff
      • Pay off your mortgage by the time you retire
      • Invest through a discount broker
    • Establish an A-1 Credit Rating
      • Pay your bills on time to maintain a good credit record
      • If you get in trouble, contact your creditors and make arrangements to pay something to show good faith
      • Avoid using credit cards unless you pay them off every month
      • Reserve consumer credit for major purchases (car or house)
    • Managing Your Credit
      • Check your credit rating annually… adjust any errors immediately
      • Avoid total debt payments exceeding 35% of income
      • National Credit Bureaus
        • 800-685-1111 Equifax – www.equifax.com
        • 888-397-3742 Experian -- www.experian.com
        • 800-888-4213 TransUnion (PA) – www.transunion.com
      • Complaints or help to resolve problem?
          • 202-326-2222 Federal Trade Commission
    • Insurance
      • Insure your possessions, car, and your health
      • Complete a detailed inventory of what you own
      • Take photos of your possessions
      • Keep the list and photos in a safe deposit box or fire-proof safe
      • Term-life insurance is cheaper than whole life
      • Regularly review your beneficiaries
    • Taxes
      • Get organized (folder, file drawer or paper bag) If eligible, open a 401(k) or IRA and fund it
      • Order IRS Publication 17 (800-TAX-FORM)
      • Get forms and help on the web:
        • www.irs.gov
      • Automatic filing extension to August 15th
      • Keep your records for 5 years
      April 15th
    • Your Biggest Tax Breaks
      • Exclusion of income of retirement plan contributions & earnings (IRA, 401k, etc.)
      • Exclusion of employer contribution for insurance
      • Interest deductions for home mortgage
      • Exclusion of state & local income & property taxes
      • Accelerated depreciation on machinery & equipment
    • Your Biggest Tax Breaks
      • Partial exclusion of social security benefits
      • No income tax from appreciation on assets at death
      • Tax exclusion on capital gains on home sales
      • Charitable contribution deductions
      • Deduction of interest on educational loans
      • Deductions for real estate taxes
    • Savings Programs
      • Risk-free savings (savings accounts, money market funds, certificates of deposit
      • U.S. Savings Bonds (tax-free earnings)
      • Mutual Funds (pooled investors’ funds)
      • Stocks (potential for long-term growth)
      • Zero Coupon Bonds (purchased at discount)
      • Insurance program (annuities, whole life)
      • Company retirement plans (401k, etc.)
    • The Secret of Compounding Interest
      • You earn interest income on your original investment and . . .
      • also earn
      • interest on interest
    • The Power of Compounding 72/Interest Rate = doubling period @ 5% Your money doubles in 14.4 years Assumes an 5% pretax return and reinvesting all earnings. 2X 2X 2X $2,000 becomes $14,080 in 40 years @ 5%
    • The Power of Compounding 72/Interest Rate = doubling period + 1% in interest Higher interest shortens the doubling period 72/6=12 years Assumes an 6% pretax return and reinvesting all earnings. 2X 2X 2X 2X $2,000 = $20,571 in 40 years @ 6%
    • Tax-Deferred Programs
      • Personal Financial Treasures
      • 401(k), 403(b), IRA, etc.
      • Unequaled tax benefits
        • contributions reduce taxable income dollar for dollar
        • profits earned on investments grow untaxed until withdrawal
        • start a 401(k), etc. as soon as you can
      • Many companies match employee contribution (.50 for every dollar, up to 6% of salary)
    • Investing
      • The only way to get money to invest is to save regularly
      • The only way to save regularly is to spend less than you earn
      • Establish an emergency fund first
      • Don’t invest in something you don’t understand
      • Be skeptical . . . if it sounds too good to be true, it probably is
      • Don’t put all your eggs in one basket
    • Big Retirement Issues
      • We’re living longer
      • We need to anticipate (and beat) inflation
      • At what age do you want to retire?
      • Don’t count on your employer or the government (social security or pensions) for retirement benefits
    •  
    • Cumulative Investment Returns & Inflation Source: T. Rowe Price Associates. For period ending 9/93. Chart does not necessarily predict future results. Stocks win!
    • Financial Security
      • Paying off your student loans
      • Buying a home
      • Educating your children
      • Meeting adversaries of life (unemployment, disability, emergencies)
      • Retiring comfortably, not running out of money
      • Yes, you can!
    • Subsidized Loans*
      • Perkins Loan
        • 5% fixed interest rate
        • Interest & repayment begins 9 months after graduation
        • 10 years to repay
      * Must demonstrate financial need through FAFSA.
    • Subsidized Loans*
      • Direct Loan
        • Variable interest, capped at 8.25% (3.42% in 2003-04)
        • Interest & repayment begins 6 months after graduation
        • $8,500 maximum each year of graduate study
        • 10-30 years to repay
      * Must demonstrate financial need through FAFSA.
    • Subsidized Loans*
      • Health Professions Student Loan
        • 5% fixed interest rate
        • Interest & repayment begins 12 months after graduation
        • 10 years to repay
      * Must demonstrate financial need through FAFSA.
    • Subsidized Loans*
      • UCD SVM Loan
        • 5% fixed interest rate
        • Interest & repayment begins 6 months after graduation
        • 3-10 years to repay
      * Must demonstrate financial need through FAFSA.
    • Unsubsidized Direct Loans
      • Not based on financial need
      • $10,000 maximum each year of graduate study
      • Variable interest begins immediately after first disbursement (3.42% in 2003-04 with cap of 8.25%)
      • May capitalize or defer interest until after graduation
      • Payments on principal start 6 months after graduation
      • 10-30 years to repay
    • Private (Alternative) Loans
      • Not based on financial need
      • Unsecured, credit-based loan that may require a co-signer
      • Variable interest starts accruing immediately upon disbursement; payments of principal and interest may be deferred while in school and during a six-month grace period after graduation
      • Interest rate: prime rate + 0 up to prime rate + 2%; 2%-6% guarantee fee depending on credit worthiness.
    • Loan Servicers
      • Direct Loans 800-848-0979
      • AMS (Perkins) 800-334-8609
      • UCD Student Accounting Office
      • (Perkins) 530-752-3646
      • Consolidation 800-557-7392