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  • 1. Lifetime Money Management University of California, Davis School of Veterinary Medicine Thursday, November 20, 2003 Donald Klingborg, DVM Christine Milligan, SVM
  • 2.
    • The value of your UCD DVM degree
    • The cost of a UCD veterinary med education
    • Financial aid & student loan information
    • Personal finance tips
    Agenda
  • 3.  
  • 4.
    • + 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
  • 5. Average Starting Compensation for Entering Class of 2003 Graduates in 2007 (UC Davis SVM ’03 )
  • 6. Who do You Believe? ’99 AVMA vs. Vet Econ
  • 7. ’ 99 & ’01 SA, LA, EQ DVM Median Income (AVMA ’01, ’03)
  • 8. Point-in-Time Earnings ’96 Vet Economics data 45% > $100,000 1/3 > $180,000
  • 9. Income-- DVM vs. Board Certified Specialist Median Income (AVMA ’01, ’03)
  • 10. ’ 01 Median Income by Years in Profession (AVMA ’03)
  • 11. Veterinarian Salaries (’98 Practice Audit)
  • 12. The Cost of Your Education
    • Estimate your total expenses
      • tuition & fees
      • books & supplies
      • rent
      • food
      • clothing
      • transportation
      • personal expenses
      • “ other” expenses
  • 13. 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
  • 14. Projected Average Loan Indebtedness Assumes $18,500 borrowed per year at UCD SVM
  • 15. Two words of comfort when going to college . . .
    • Financial Aid
  • 16. 3 x Two words of danger when going to college . . .
    • Credit Cards
    • Pizza & Beer
    • Financial Aid
  • 17. The Financial Aid Equation Budget or estimated cost of attendance - E xpected student contribution = E stimated Financial Need & eligibility for financial aid
  • 18. 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
  • 19. 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
  • 20. 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
  • 21. 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)
  • 22. 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
  • 23. Cancellation of Your Loan
    • If you become totally and permanently disabled after loans are taken… or
    • Upon your death
  • 24. 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...
  • 25. 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
  • 26. 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
  • 27. 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
  • 28. 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
  • 29. 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
  • 30. 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.
  • 31. 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.
  • 32. 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.
  • 33. 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.
  • 34. 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.
  • 35. 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
  • 36. Disposable Income vs. Debt ( 33% to taxes/withholding)
  • 37. 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
  • 38. 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
  • 39. Monthly Payments go Down With Longer Repayment Periods & Lower Interest Rates Monthly Payments per $10,000
  • 40. Interest Paid Increases with Longer Terms Summary per $10,000 @ 8%
  • 41. Interest Paid Increases with Longer Terms & Higher Rates Total Interest per $10,000
  • 42. 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
  • 43. 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.
  • 44. 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
  • 45. 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
  • 46. 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
  • 47. 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
  • 48. 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)
  • 49. 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
  • 50. 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
  • 51. 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
  • 52. 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
  • 53. 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
  • 54. 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.)
  • 55. The Secret of Compounding Interest
    • You earn interest income on your original investment and . . .
    • also earn
    • interest on interest
  • 56. 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%
  • 57. 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%
  • 58. 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)
  • 59. 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
  • 60. 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
  • 61.  
  • 62. Cumulative Investment Returns & Inflation Source: T. Rowe Price Associates. For period ending 9/93. Chart does not necessarily predict future results. Stocks win!
  • 63. 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!
  • 64. 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.
  • 65. 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.
  • 66. 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.
  • 67. 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.
  • 68. 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
  • 69. 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.
  • 70. Loan Servicers
    • Direct Loans 800-848-0979
    • AMS (Perkins) 800-334-8609
    • UCD Student Accounting Office
    • (Perkins) 530-752-3646
    • Consolidation 800-557-7392