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					2009 Exit Interview Session
2009 Exit Interview Session
                 y
Indiana University School of Medicine
            Class of 2009
          March 19, 2009
          March 19 2009
         The Reality is this…
         The Reality is this…

Financial planning starts now, not when you 
get out of residency
get out of residency

You may be able to reduce the total amount 
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you pay back on your student loans

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Strategy is key to your success
We will go over strategies today to help you get started 
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      successfully managing your student loans. 

      Know your loan portfolio
      K           l       tf li
      Know how to postpone payments while 
      in residency and fellowship as well as 
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      know your grace, deferment and 
      forbearance options
      Know your decision points and keep a 
      calendar
      Run the numbers before choosing a 
      Run the numbers before choosing a
      repayment plan or consolidation
      Know your rights and responsibilities
      Stick to a budget, maintain good records,  
      and use credit wisely
      Understand the consequences of 
      delinquency and default
      Know and use your support systems
      Know and use your support systems
 IUSM Class of 2009 Indebtedness
 IUSM Class of 2009 Indebtedness
           2008         2008       2008
                                                  IUSM
            All        Public     Private
                                              Class of 2009
          Schools     Schools     Schools

 Mean $154,607 $143,140 $173,304                $166,247
Median $155,000 $145,000 $180,000               $175,000

87.0% of the Class of 2008  reported having educational debt
91.6% of 2008 IUSM graduates had educational debt
       f                d        ll h    d         ld b
89.1% of 2009 IUSM graduates will have educational debt
56.0% of the Class of 2008 reported debt of $150,000 or higher
60.1% of 2008 IUSM graduates had debt of $150,000 or higher
60 1% of 2008 IUSM graduates had debt of $150 000 or higher
62.0% of 2009 IUSM graduates have debt at $150,000 or higher 
Know Your Loan Portfolio
 Student Educational Loan Portfolios 
          can be complex.
                     p
Master Promissory Note (MPN)
Master Promissory Note (MPN)
A contract with the Lender, for your borrowing 
with Sallie Mae (completed prior to your first 
year and again in Summer 2007) and with the 
U.S. Department of Education (completed in 
Summer 2008), for your borrowing during the 
2008‐2009 academic year.
Details your borrower Rights and 
Details your borrower Rights and
Responsibilities
Defines Terms and Conditions of the loans
      Rights and Responsibilities
      Rights and Responsibilities
       include the ability to:
Rights include the ability to:

                f d ll        ih         l
     Prepay any federal loan without penalty
     Request a shorter repayment schedule
     Change repayment plans
     Request a deferment or forbearance
     Request a deferment or forbearance
Review your promissory note for all rights
     Rights and Responsibilities
     Rights and Responsibilities
Responsibilities include:
     Make on‐time loan payments
     Make payments despite receipt of bill
     Notify the lender of changes in contact
     Notify the lender of changes in contact 
     information
     Attend an Exit Counseling session
     Attend an Exit Counseling session
Review promissory note for all responsibilities
Review promissory note for all responsibilities
          A serious obligation
          A serious obligation
Student loans must be repaid whether or not:
Student loans must be repaid whether or not:
     Program was completed
     Program completed in normal amount of 
     time
     Satisfied with your educational experience
     Employment is obtained
     Employment is obtained
Finding Your Federal Student Loans
A copy of your report is in your folder we handed out today.




       www.nslds.ed.gov
     • www nslds ed gov
           www.nslds.ed.gov
To access, you provide:
To access you provide:
     Social Security Number
     Date of Birth
     First 2 letters of your last name
     Personal Identification Number (PIN) 
    (www.pin.ed.gov) – Same PIN you used in filing 
    your FAFSA.
What are the Interest Rates?
                              In school, Grace                               Forbearance/
  Most Commonly Used Programs and Deferment                                   Repayment

  Federal Stafford Loans                                 6.8%                      6.8%
  (disbursed on or after 7/1/06)                          fixed                     fixed
  Federal Stafford Loans*                               3.61%                     4.21%
  (disbursed between 7/1/98 and 6/30/06)                   i bl
                                                        variable                     i bl
                                                                                  variable
  Federal Graduate PLUS                                  8.5%                      8.5%
  Loans**                                                 fixed                     fixed

  Federal Perkins Loan,                                  5.0%                      5.0%
  Cunnison, LDS and PCL                                   fixed                     fixed
  Loans
  Federal Consolidation Loan                    Fixed rate based on weighted average interest
                                                rate of underlying loans rounded up to nearest
                                                one-eighth of a percent (capped at 8.25%).



 * Variable, changes every July 1 based on the 91‐day U.S. Treasury  Bill plus 1.7%, capped at 8.25%
 * Variable changes every July 1 based on the 91 day U S Treasury Bill plus 1 7% capped at 8 25%
**   Direct Loan Graduate PLUS Loans 7.9%  for those loans borrowed in 2008‐2009 academic year
                 Interest Capitalization
                 Interest Capitalization
    What is it? The addition of accumulated and 
    unpaid interest to the original principal loan 
    balance.
          Increases the total amount due
          The less frequent the better (less 
          compounding effect)
          Identify your lender’s (or DL’s)  policy
      Medloans and  DL Program capitalizes interest on unsub loans at the end of the grace and 
Note: Medloans and DL Program capitalizes interest on unsub loans at the end of the grace and
   again at the end of the uninterrupted periods of authorized deferment.
       Repayment Strategies
       Repayment Strategies

Prioritize repayment efforts – prepay the most 
  expensive debt FIRST!  ‐ Example, your 
  expensive debt FIRST! Example your
  Medical Private Loans or the R&R Loan
Pay the interest on unsubsidized loans PRIOR to 
    p                   p
  capitalization – when possible 
Understanding your loan portfolio is the first step in effectively managing its 
U d t di            l       tf li i th fi t t i ff ti l                 i it
repayment.   Each loan type has its own set of repayment terms and 
conditions to consider.


      Questions to Consider?
          Sample questions
      • What are your payments and when are they due?
      • Can you afford these payments?
      • Can you afford these payments?
         – If not, do you need short‐term or long‐term relief?
      • Do you have loans with different interest rates?
      • Do you have loans with multiple lenders / servicers?
      • Do you have loans with multiple lenders / servicers?
      • Are your current loans eligible for incentive benefits?
      • Do you have federal education loans? Private education loans?                    
      Other debt?
    IUSM Class of 2009 Complexities
    IUSM Class of 2009 Complexities
•   Some of you may have consolidated your Federal Stafford Loans prior or after your 
    first year to fix the interest rate on those loans at 4.75% (or lower) prior to July 1, 
    first year to fix the interest rate on those loans at 4 75% (or lower) prior to July 1
    2006.  As a result, those who consolidated lost the grace period on the loans 
    consolidated.

•   Hopefully no one consolidated after July 1 2006 given that we were in a fixed
    Hopefully, no one consolidated after July  1, 2006 given that we were in a fixed 
    rate environment already with loans borrowed after this date and where 
    consolidation was no longer a real consideration.

•               y ,      ,         y       y                  g
    Prior to July 1, 2006, some of you may have borrowed through the MEDLOANS
    Alternative Loan Program (ALP), now designated as the Medical Private Loan in 
    your Sallie Mae record.  This is a private loan. 
    Beginning in the Fall 2006, you most likely borrowed through the Graduate PLUS 
    Loan.  This is a Federal student loan.
    Loan This is a Federal student loan

•   Some of you borrowed through the Residency Interviewing and Relocation Loan 
    this year.  This is a private loan. 
    2004‐2005 (MEDLOANS*) Sallie Mae Federal 
    Stafford Loan Borrower Benefits at a Glance
    S ff d L      B        B   fi        Gl
•   Unconsolidated Loans
    ‐ Receive a loan credit or cash based on 3.5% of the original Stafford Loan 
    amount at graduation.
    ‐ Receive a 4.5% cash or loan credit based on the original Stafford Loan 
    amount when you make 33 on‐time payments.
    amount when you make 33 on time payments
    ‐ Interest Capitalization at Repayment

•   Consolidated Loans
     ‐ Receive a loan credit or cash‐back benefit, based on 1% of the initial 
    MEDLOANS consolidation loan balance after making the first three 
    payments on‐time.
           i            f %d i         i d f i                   f        ki
    ‐ Receive an IRR of 1% during periods of active repayment, after making 
    the initially scheduled 24 monthly payments by the due dates.
    ‐ An immediate .25% IRR for payments made through automatic debit. 
    *MEDLOANS is no longer being used in your Sallie Mae Record
    *MEDLOANS i     l      b i      di        S lli M R       d
    2005‐2006 (MEDLOANS) Sallie Mae Federal 
    Stafford Loan Borrower Benefits at a Glance
    S ff d L      B        B   fi        Gl
•   Unconsolidated Loans
      Receive a loan credit or cash based on 3.5% of the original MEDLOANS 
    ‐ Receive a loan credit or cash based on 3 5% of the original MEDLOANS
    Stafford Loan amount when you graduate and sign up on Manage Your 
    Loans (MYL) prior to repayment to receive account information by e‐mail.
    ‐ Receive a loan credit or cash back based on 4.5% of the original 
    MEDLOANS Stafford Loan amount when you make your first 33 payments 
    MEDLOANS Stafford Loan amount when you make your first 33 payments
    by the due dates, as initially scheduled. 

•   Consolidated Loans
                  l      d        hb kb      f b d             f h         l
    ‐ Receive a loan credit or cash‐back benefit, based on 1% of the initial 
    MEDLOANS consolidation loan balance after making the first three 
    payments on‐time.
    ‐ Receive an IRR of 1% during periods of active repayment, after making 
     h i i i ll     h d l d         hl            b h d d
    the initially scheduled 24 monthly payments by the due dates.
    ‐ An immediate .25% IRR for payments made through automatic debit.
    2006‐2007 (MEDLOANS) Sallie Mae Federal 
    Stafford Loan Borrower Benefits at a Glance
    S ff d L      B        B   fi        Gl
•   Unconsolidated Federal Stafford Loans
     ‐ Receive a loan credit or cash based on 3.5% of the original MEDLOANS Stafford 
    Loan amount when you graduate and sign up on Manage Your Loans (MYL) prior to 
    repayment to receive account information by e‐mail.
      Receive a loan credit or cash back based on 4.5% of the original MEDLOANS 
    ‐ Receive a loan credit or cash back based on 4.5% of the original MEDLOANS
    Stafford Loan amount when you make your first 33 payments by the due dates, as 
    initially scheduled. 

•   Unconsolidated Graduate PLUS Loan
    ‐ .25% Interest Rate Reduction (IRR) awarded at 1st disbursement
    ‐ .75% IRR awarded at repayment (active periods of repayment as long as 
    borrower is current)
    borrower is current)
    ‐ .50% IRR awarded for automatic payments
    ‐ 1% loan credit after 6 on‐time payments
    ‐ 2% loan credit after 24 on‐time payments
                     l            h    d f f                  l d       f b
    ‐ Interest Capitalization at the end of Deferment, quarterly during forbearance, 
    and at the end of forbearance.
    2007‐2008 (MEDLOANS) Federal Stafford Loan and 
    Graduate PLUS Loan Borrower Benefits at a Glance
    G d t PLUS L       B        B   fit t Gl
•    Loans disbursed July 1, 2008 through January 31, 2008

                                                t disbursement and good during uninterrupted 
     Stafford Loans ‐ .30% IRR awarded at 1st d b
         ff d                        d d                          d      dd                     d
     periods of school, grace and deferment.  1% IRR after the 1   st on‐time payment.  75% IRR for 

     auto debit payments.  Interest  capitalization once after uninterrupted periods of grace and 
     deferment.
     Graduate PLUS Loan ‐ .60% interest rate reduction  awarded at 1st d b
          d                                         d            d d       t disbursement.   .75% at 

     active repayment with the borrower signing up for MYL and agree to receive all account 
     information via e‐mail.  Interest capitalization once after uninterrupted periods of deferment.

•    Loans disbursed Feb. 1, 2008 through June 30, 2008

     Stafford Loans ‐ .40% interest rate reduction for Auto‐Debit payment through Direct Repay –
     available during active repayment for as long as the borrower’s monthly payment is 
     successfully deducted from the borrower’s bank account.
     Graduate PLUS Loan ‐ .70% interest rate reduction for auto‐debit payment – available during 
     active repayment for as long as the borrower’s monthly payment is successfully deducted 
     from the borrower’s  bank account.  1% loan credit after the first 12 payments are made by 
     the due dates as initially scheduled if borrower signs up on Manage Your Loans (MYL) prior to 
     the first payment due date to receive account information by e‐mail.
Subsidized Loans
 • Loans with no interest cost to the borrower 
   while in school, grace and authorized 
   while in school grace and authorized
   deferments:
Federal Subsidized Stafford Loan
Federal Perkins Loan
Federal Primary Care Loans (PCL)
Federal Loans for Disadvantaged Students (LDS)
Federal Loans for Disadvantaged Students (LDS)
Some institutional loans (Mabel Sledd Cunnison Loan)
Consolidation (underlying eligible subsidized loans)
C    lid ti ( d l i        li ibl    b idi d l     )
Unsubsidized Loans
Loans which accrue interest from date of disbursement.  
Borrower responsible for all accrued & capitalized 
Borrower responsible for all accrued & capitalized
interest:


•   Federal Unsubsidized Stafford Loan
•   Federal Graduate PLUS Loan
•   Private Loans
•   Consolidation (underlying unsubsidized 
    loans)
         )
    Relative Cost of Student Loans
  Relative cost refers to :
• Relative cost refers to :

•     a) interest rate

•     b) capitalization policy

•     c) borrower benefits
       Other Loan Interest Rates
• Private loans are typically variable ‐ For example, the 
  MEDLOANS Alternative Loan Program (ALP ) is Prime Rate 
  plus 0%.

• Institutional loans have different rates ‐ check the  
  promissory note.   Most of the IUSM institutional loans are 
  5% simple interest.
• Know Your Grace, Deferment, 
  and Forbearance Options as 
  well as how to Postpone 
  Payments
   Grace, Deferment and Forbearance 
   all help you to postpone payments 
   on your student loans until you get 
       y                       y g
   through your residency and 
   fellowship.  
                                 Grace
•   Period of time following graduation when you are not required to make 
    p y          y
    payments on your loans
•   It is Automatic, you do not have to apply.  It must be used first before 
    any other options to delay repayment can be activated.
•   Subsidized loan interest is paid by the Federal government making the 
    loan essentially interest‐free to the borrower during grace. 
•   Unsubsidized loans that includes the Federal Unsubsidized Stafford 
    Loan and the Federal Graduate PLUS Loan continue to accrue interest 
    during the grace period.
•   Availability and duration is loan specific.  For example,  the Federal 
    Stafford Loan grace period is 6 months after graduation, Federal 
    Perkins Loan is 9 months, and 1 year grace for the Cunnison, LDS and 
    PCL loans.
            Postponement Options
Deferments
 Economic Hardship Deferment


                   p
 Graduate Fellowship – unlimited


 Military
 For a complete list and details on types of deferment: 
 www.aamc.org/students/financing
       Postponement Options
       Postponement Options
Economic Hardship Deferment
Economic Hardship Deferment
No longer available beginning July 1, 2009
Applications submitted prior will be processed
Alternatives include:
  Internship/Residency Forbearance
‐ Internship/Residency Forbearance
‐ Income‐based Repayment (IBR)
       Postponement Options
Economic Hardship Deferment
    Only federal loans in repayment are considered

    Submit application prior to July 1 2009
    Submit application prior to July 1, 2009

    Work closely with your lender(s)

    Allow 30 days for processing

     Economic Hardship Deferment Calculator:
          www.aamc.org/students/financing
       Postponement Options
       Postponement Options
Internship/Residency Forbearance
Internship/Residency Forbearance



 ‐ Used to postpone payments
 ‐ Requested annually from servicer, Sallie Mae  and 
 Direct Loans
 ‐ Interest accumulates on sub and unsub loans
 ‐ Continuous periods may avoid capitalization
        Postponement Options
        Postponement Options
Income‐Based Repayment (IBR)
    Payment based on household income/family size 
    (annual verification required)
    (annual verification required)
    Interest is paid by Federal Government on 
                 loans (first 3 yrs)
    subsidized loans (first 3 yrs)
    Unpaid interest does not capitalize*
    * Capitalization of interest occurs when borrower moves out of IBR
    * C it li ti      fi t     t         h b                  t f IBR

    Balance forgiven after 25 years
   Income Based Repayment (IBR)
   Income Based Repayment (IBR)
Defined: 15% of income that exceeds 150% of 
Defined: 15% of income that exceeds 150% of
 the poverty line for a borrower’s family size.

STEP I – Determine 150% of poverty line
STEP II – Subtract from Monthly gross income*
STEP III – Multiply remaining income by 15%
                py          g         y

              gj      y                             p
*Married filing jointly includes both borrower and spouse income.
Income Based Repayment (IBR)
Income Based Repayment (IBR)

 Monthly Gross Income                                                   $3,805
 150% of the poverty line
 150% of the poverty line                                             ‐ $1,300
                                                                      = $2,505
 15% of difference                                                    x       .15
 Monthly Loan Payment                                                 =    $ 376*
    •* Based on a family size of 1 and an annual salary of $47,500 and 2008 Poverty Levels
                              of”1



                •www.IBRinfo.org
Forgiveness Options
         Terms and Conditions
         Terms and Conditions
Public Service Loan Forgiveness
Public Service Loan Forgiveness
  Must make 120 loan payments to Direct Loans
  Must work 10 years in Public Service
  Does not have to be continuous work
  Payments made after October 1, 2007
        Terms and Conditions
        Terms and Conditions
What is considered Public Service?
What is considered Public Service?

           fi               0 [ ](3)
  Non‐profit, tax exempt, 501[c](3)
  organizations
  Federal, State or Local Government
  Military Service
         y
  Public Schools and Colleges
        Terms and Conditions
        Terms and Conditions
Loan Forgiveness Options
Loan Forgiveness Options

      oa epay e t og a s
 NIH Loan Repayment Programs: 
    www.lrp.nih.gov

 NHSC Repayment Programs: 
   www.nhsc.hrsa.gov

 Other programs listed at AAMC website: 
                   / tl
    www.aamc.org/stloans
          Terms and Conditions
          Terms and Conditions
Discharge may also be available in cases of:
Discharge may also be available in cases of:
     • Death/Disability

     • Closed school / False certification

       Certain public school service professions 
     • Certain public school service professions

     • Identity Theft

     • Bankruptcy (rarely)
Run Some Numbers
    Repayment Strategy
    Repayment Strategy

To reduce the cost of student loans, 
 you can make additional principal 
            payments
               p y
     Current Repayment Plans

  Standard (Level) Repayment 
• St d d (L l) R           t

             p y
• Extended Repayment

• Income Based Repayment (IBR)

• Graduated Repayment

• Income Sensitive Repayment ‐ FFELP
• Income Contingent – Direct Loans
                      p y
       Private Loan Repayment

  Typically unsubsidized for life of loan
• Typically unsubsidized for life of loan
• Usually a “grace” period – forbearance may be available
  Both the (MEDLOANS ALP) Medical Private Loan and the SM 
  Both the (MEDLOANS ALP) Medical Private Loan and the SM
  Residency Interview and Relocation Loan have a three year 
  grace period.  Option for Forbearance is available for both 
  loans as well.
• Repayment terms vary – choice of plans may be available
         be included in a hardship deferment
• Cannot be included in a hardship deferment
• Cannot be included in IBR
           Repayment Plans
           Repayment Plans
Effects of each Repayment Plan on Cost
Effects of each Repayment Plan on Cost
              Repayment Plans
              Repayment Plans
                y y                 y yp      p y
Estimated Monthly Payment Amount by type of Repayment Plan.
   Debt Manager Booklet: Page 18‐19
Other Considerations 
     Federal Loan Consolidation
     Federal Loan Consolidation
Effects of consolidating in today s environment
Effects of consolidating in today’s environment

      Longer term = Increased interest costs
      Longer term  Increased interest costs

      Possible forfeiture of borrower benefits

      Rounding may result in a higher interest rate

      May negatively affect grace, deferment, or forgiveness 
      May negatively affect grace deferment or forgiveness
      options
     Federal Loan Consolidation
     Federal Loan Consolidation
 When to consider Consolidation :
•When to consider Consolidation*:
       Variable rates are low

       Multiple lenders to repay 

       To obtain Public Service Loan Forgiveness (DL)
       To obtain Public Service Loan Forgiveness (DL)

       To make Perkins or LDS loans eligible for IBR

  *Benefits may differ between lenders
     Private Loan Consolidation
     Private Loan Consolidation
Private Loan Consolidation – BE CAREFUL

     Understand all fees and costs involved 

     Do NOT include Federal loans 

     Federal loans will lose all rights (i.e.‐ tax, 
     forgiveness and subsidies)
     forgiveness and subsidies)
 The Taxpayer Relief Act of 1997
 The Taxpayer Relief Act of 1997
                             Partial
          Full Deduction                  NO Deduction
                            Deduction

                            $55,000 to     $70,000 or
Single    $54,999 or less
                             $69,999         more
Married    $114,999 or      $115,000 to   $145,000 or
 filing
Jointly       less           $144,999        more

 Deduction for interest paid on loans may not exceed 
   $2,500 per year
   $ ,     p y
 Voluntary payments may be eligible
 Capitalized interest may be included
   p                    y
           www.irs.gov/publications/p970
           Consequences of…
           Consequences of…
      q
•Delinquencyy
Reported to credit bureaus, affects your credit

Default
Negatively affects your credit
Wages and tax returns can be garnished
Lawsuit leveled against you (responsible for 
     )
costs)
Other federal debt collection methods
• Create a Spending Plan, 
  Maintain Good Records, and Use 
             l
  Credit Wisely
     Budgeting with Your Stipend
     Budgeting with Your Stipend
                                            Single    Married
•   IUSM PGY‐1 Stipend                      $46,146   $46,146
•   Less 33% for taxes, FICA (for single)   $15,228
    Less 33% for taxes FICA (for single) $15 228
•   Less 24% for taxes, FICA (married)                $11,075
•   Annual take home pay
    Annual take home pay                    $30,918   $35,070

• Monthly net take home pay               $  2,577    $  2,923

Compare with your monthly financial aid budget this year
and  there is your first bump in income
and there is your first bump in income
What the Future has Store for YOU
What the Future has Store for YOU
 The Medical Group Management Association 
 The Medical Group Management Association
 reports primary care physicians earned a 
 median of $182 322 in 2007 while specialists
 median of $182,322 in 2007, while specialists 
 earned a median of $332,450, with 
 cardiologists, radiologists and 
 cardiologists radiologists and
 gastroenterologists all above $400,000.
 udget g    t   ou St pe d
Budgeting with Your Stipend

Consider speaking with a financial professional 
Consider speaking with a financial professional

  Some of the key professionals in your life:

  Private Banker
  Financial Advisor
  Certified Financial Planner
  Certified Financial Planner
  Certified Public Accountant

   Financial Planning Association www.fpanet.org

   National Association of Personal Financial Advisors
       www.napfa.org
Discretionary Income…Lifestyle Choices
     Keeping Good Records

  Keep in one place all of your loan papers 
  Keep in one place all of your loan papers
Notify your loan servicer of changes
Document calls to servicer: when you call, to 
 whom you speak, and the subject of the call
Keep important numbers available – bookmark 
  sites
Open and READ your student loan mail !!!
Student Loans and Credit




    www.annualcreditreport.com
• Understand the Consequences 
  of Delinquency and Default
Consequences of   . . .
• Delinquency

Failure to make payment(s) when due
Reported to credit bureaus, affects your credit history

• Default

After 270 days late, servicer assumes you will not pay
After 270 days late servicer assumes you will not pay
Servicer can garnish your wages and tax returns
Servicer can sue ‐ you are responsible for costs
Collection agencies take over  
School can withhold records
             p           g      g
Licenses are pulled in a growing number of states
Student loans rarely discharged in bankruptcy
• Know and Use Your Support 
  Systems and Resources
  pp        g       y
Support Along the Way
 www.aamc.org/FIRST : FIRST for Residents Mailbox


www.ombudsman.ed.gov
1‐877‐557‐2575


                                                “MD2 – Monetary Decisions
                                                    for Medical Doctors”
                                                    f M di l D t ”

                               Your loan servicers’ and their web sites



                         Your residency program

                 Your medical school financial aid office

				
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