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					Product of Prime Student Loan, LLC                                                                                                                                2013-04-10



Student Loan Repayment Strategies for T. Jefferson


Introduction                                                                             Recommendations and How to Proceed
     When deciding how to manage student loan debt, many borrowers                            In order to realize your optimized monthly payment, you will need
opt to maximize their monthly payments in order to minimize the total                    to perform the following:
interest paid over the lifetime of their loans. While this option may                         Private Loan Refinancing We recommend you refinance the
make intuitive sense, ultimately it does not make financial sense. At                    following private loans: 1015, 1016, 1017. This will only take 10 - 15
Prime Student Loan (PSL), we seek to optimize loan repayment. In                         minutes! Visit www.custudentloans.org/primestudentloan to begin
practice this means minimizing your monthly loan payments. For an                        refinancing.
explanation of the benefits of reduced monthly payments, see the                              Federal Loan Consolidation. We recommend you consolidate the
Rationale section.                                                                       following federal loans to the maximum term: 1011, 1012, 1013, 1014,
     PSL has analyzed your current loan portfolio and devised an                         1018. Visit www.loanconsolidation.ed.gov to begin the consolidation
optimized repayment plan for your consideration. Our analysis is based                   process. Note that subsidized and unsubsidized federal loans must be
on the information provided in your PSL account. We ask that you                         consolidated separately.
review the information to ensure its accuracy and to make sure all loan
information is included. Private loan information is particularly                        Rationale
important, because PSL may be able to lower both monthly payments                            The purpose of minimizing monthly loan payments is to maximize
and interest rates on your private loans.                                                your discretionary income, defined here as income net of taxes and
                                                                                         student loan payments. Discretionary income represents the cash
Results                                                                                  available to you to spend, save, or invest. It is the money you use to pay
    You are currently making a monthly student loan payment of                           rent, buy groceries, take vacations, and add to a 401k.
$1,330 on the loans listed in Table 1. By consolidating federal loans                        When you make more than the minimum possible loan payment,
and refinancing eligible private loans, your monthly payment could be                    the extra cash is lost to you. If an unexpected bill or investment
reduced to as little as $760 (Figure 1). That means an initial savings of                opportunity arises, you cannot retrieve that extra money from your
$569 per month or $6,838 per year. Assuming an annual return on                          student lender. Borrowing the money again is expensive: after student
investment of 6%, it is possible for you to save a total of $93,855 over                 loans, credit card debt is usually the cheapest source of unsecured
the first 10 years of repayment. A detailed analysis can be viewed in                    consumer debt, which often carries interest rates above 15% annually.
the accompanying Excel file titled Repayment Analysis Details .                          Overpaying student loans comes at a cost, termed opportunity cost.
                                                                                             The opportunity cost of making more than the minimum payment
             Effect of Repayment Strategy on Monthly Payment                             on your student loans consists of the purchasing power of the lost cash,
                                                                                         the value of any future capital gains you might make by saving or
                                                                                         investing the cash, and the liquidity premium derived from having that
                                                                                         savings on hand. The lost value of future capital gains is particularly
                                                                                         important if you anticipate that investment returns may approach or
                                                                                         even exceed the interest rates on your student loans themselves.
                                                                                         Combined with the fact that investment in retirement accounts is often
                                                                                         tax-deductible, the opportunity cost of foregone investment
                                                                                         opportunities can be great.
                                                                                                                                         (Text continues on page 2.)



                                                                                         Table I Current Loan Characteristics
                                                                                         Loan ID                 Loan Type             Amount      Rate   Maturity   Monthly
                                                                                           1011    DIRECT PLUS                          $17,155     6.7     120       $196
                                                                                           1012    DIRECT PLUS                          $35,279     6.7     120       $404
                                                                                           1013    FEDERAL PERKINS                      $10,712     6.7     120       $122
                                                                                           1014    DIRECT STAFFORD UNSUBSIDI            $15,121     5.5     120       $164
                                                                                           1015    Signature Student Loan                $9,838     9.5     120       $127
                                                                                           1016    Signature Student Loan                $6,784     8.5     120        $84
                                                                                           1017    Signature Student Loan               $12,789     7.5     120       $151
Figure 1 Effect of Repayment Strategy on Monthly Payment. Monthly payment was              1018    FEDERAL PERKINS                       $8,074     3.5     120        $79
determined under different repayment conditions based on the information provided        Totals                                        $115,752   6.752     120      $1,330
in your PSL - SLH web account. Current represents your estimated monthly payment
as it stands. Consolidated represents your monthly payment after the consolidation       Table I data come from the information provided in your PSL-SLH account. Table I
and refinancing of eligible federal and private loans. IBR represents your monthly       shows the characteristics of your loans under your current repayment strategy in the
payment after refinancing eligible private loans and adopting the Income Based           absence of PSL recommendations. Maturity is given in months. Maturity and Monthly
Repayment plan for federal loans.                                                        are calculated as described in the PDF document PSL_Disclaimer.

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Product of Prime Student Loan, LLC                                                 2013-04-10


     Of course there is a tradeoff to minimizing monthly loan payments.
While you forego the opportunity cost of lost cash, you must make
lower payments for a longer period of time. You will therefore pay
more in interest over the lifetime of your loans. At PSL we favor
opportunity cost savings for two reasons. First, minimizing loan
payments allows you to use your discretionary income to repay higher
interest rate loans first. Simply repaying unsubsidized loans before
repaying subsidized loans can produce significant savings over the
lifetime of your loans. Second, as mentioned above, it is possible to
make money in the long run by investing your monthly savings.

Federal Term Extension: All Reward and No Risk
     There is a clear benefit to refinancing private loans to lower interest
rates, but the benefit of extending the term of federal loans may be less
obvious. We argued that increasing free cash flow today is worth
paying more interest on federal loans in the long run. But let us imagine
you remain skeptical. You have plenty of cash saved up for a rainy day.
You do not believe market returns can reasonably approach the interest
rates on your loans. Or maybe you are fundamentally opposed to
having debt even if it makes financial sense to do so. What now?
     You should still extend the term of your federal loans! Federal term
extension reduces your minimum mandatory monthly payment, but you
can always pay more without penalty. Term extension gives you more
financial freedom. It maximizes monthly free cash flow and allows you
to decide how best to use it, even if that happens to be paying back
your student loans.
     If you have questions or comments, please contact us. We at PSL
are dedicated to helping you find the right repayment strategy. For
further discussion of all things related to the student lending market,
visit our blog at www.primestudentloan.com/blog.aspx.




Prime Student Loan, LLC
ONE Marina Park Drive, 14th Floor
Boston, MA 02110
www.primestudentloan.com
info@primestudentloan.com




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