- Financial Literacy
AOMA is committed to offering an affordable education that is accessible to students from a variety of backgrounds. In an effort to reduce student indebtedness, AOMA encourages students to explore a variety of sources for funding their education. In situations where other funding sources do not exist and when students choose to fund their AOMA education through student loans, AOMA encourages students to budget carefully. Careful financial management before, during, and after enrollment can reduce overall debt and create a solid financial platform from which to begin an acupuncture practice after graduation.
The Financial Services Administrator is available to help students develop and follow a personal budget. Careful budgeting can help minimize the amount a student needs to borrow. In addition, students are urged to consider the following suggestions so that they might identify areas of strength and/or weakness in their own attitudes and practices related to finance and budget:
Identify Needs versus Wants
Needs are basic items that a human needs to survive such as food, shelter, clothing, and transportation. Additional needs to sustain or improve quality of life entail health costs, such as medicine and insurance. Wants are things that we do not need to survive but wish we could have if we were able acquire them. Ask yourself if you can live without something. What would happen if you did not have the item in question? Would you still survive without this object or experience?
Write down a list of all of your monthly spending - everything to the last dime, including cash donations or other outlays that do not entail actual purchases or bill payments. This step may require you to start keeping all your spending receipts for a whole month. Then, separate the receipts by needs and another stack by wants. The best way to categorize these is to determine what is needed to survive. Remember, expenditures related to items/actions that are not needed to survive will be your wants receipts. The next step is to write your needs figures down on a budget sheet. Total the numbers. Any debt needs to be paid and should be on your budget list until it is paid off. Try to eliminate debt as soon as possible with the smallest balance to the largest being last. Have an emergency financial plan.
Assess where you can save money by eliminating what you want and do not need to have. Open a savings account if you do not have one. A savings account is handy for emergencies or special annual expenses. If you do not have an emergency fund in case there is an interruption of income for any reason, plan on saving money for monthly needs expenses and for an emergency fund. Revise your budget accordingly.
For a link to a sample budget calculator click here:
An assessment of the new revised budget is recommended to determine ongoing school and future expenses such as repayment of student loans. As you borrow more, your repayment amount will increase when you start repayment. It is best to start early and keep up with your budgets regularly.
Budgeting and Borrowing Overview
Source: 2012 US Dept. of Education Federal Student Aid Conference
- Before you Borrow
Borrowing from the student loan programs to finance an AOMA education is an investment in a student’s future income potential. When borrowing against future income, it is important maintain a realistic understanding about the amount and timing of that income. As with any health professional entering private practice, individuals entering the field of acupuncture must always be aware that, even though they may ultimately be significant, it is common for earnings to be sporadic in the beginning of practice. By carefully estimating future income, and by managing loan repayment accordingly, borrowers can avoid delinquency, default, and unnecessary interest accrual.
AOMA recommends that students minimize the amount of money they borrow and maintain a clear picture regarding the impact of loan payments on their economic future. Students should establish contingency employment plans, and familiarize themselves with all available financial resources while borrowing and in repayment. The information provided below is intended to help students effectively manage their student loan debt.
Keep in Mind the Following:
- Be a responsible borrower! A student loan is borrowed money that must be repaid.
- You must keep your loan servicer informed of any changes in your name, address, telephone number, social security number, or school enrollment status.
- You must repay your loan even if you did not finish the education you received or you can’t find a job after you graduate.
- There are repayment options available to assist you if you’re having trouble making payments.
- If you are unable to make payments and you apply for a deferment, forbearance, or consolidation, you must continue to make payments on your loan(s) until you have been notified that your request has been approved.
- You can prepay the whole loan or any part of it at any time without penalty. This means you are paying some of the loan before it’s due.
- You must make payments on your loan even if you don’t receive a bill or repayment notice. Billing statements are sent to you as a convenience, but you have to make payments even if you don’t receive any reminders.
Consequences of Default
Becoming delinquent or defaulting on a student loan is very serious. Consequences include:
- Your student loan account balance and status will be reported to national credit bureaus on a regular basis. Just as failing to repay your loan can damage your credit rating, repaying your loan responsibly can help you establish a good credit rating
- Failing to pay according to the terms of your loan contract, or Master Promissory Note, on a federal student loan incurs severe and long-lasting consequences.
- You might not be able to finance a car.
- You may not be approved for a private loan.
- Your federal income tax refund could be applied to your student loan balance instead of being sent to you.
- Your wages may be garnished.
- You will be ineligible for financial aid if you need it at a later date.
Additionally, students who default on loans also jeopardize AOMA's ability to offer financial aid to future students.
Responsible Borrowing - brought to you by Federal Student Aid
Paying or Capitalizing Interest
The federal government pays the interest on Direct Subsidized Loans during periods of in-school deferment and during the six-month grace period. Direct Unsubsidized Loans accrue interest from the date the loan is disbursed. During school, borrowers can pay the interest accrued on Direct Unsubsidized Loans and avoid the capitalization of that interest when repayment begins. For more information on Direct Loan capitalization, visit the Federal Student Aid website.
A deferment is a pre-arranged postponement of loan payments that results from either:
A communication with the lender; or
As part of the terms of the loan.
Payments on Direct Loans may be deferred when a borrower is enrolled in an eligible educational program at least half-time (six credits). This is called “in-school deferment”. As soon as a borrower ceases half-time enrollment (e.g. drops below six credits, takes a leave of absence, withdraws, or graduates), in-school deferment ceases, and loans enter repayment.
New AOMA students with existing loan debt should automatically receive in-school deferment of their existing loans. Once enrolled at AOMA, students should receive communication from their lender that their loans have been placed in deferred status. If this does not happen, students should complete a DL In-School Deferment Form and/or a FFELP In-School Deferment Form and submit the completed form to the Financial Services Administrator.
For Direct Subsidized and Unsubsidized loans, the federal government offers a “grace period” during which a borrower is not required to make loan payments.
This grace period begins the day after a borrower ceases half time enrollment (e.g. drops below six credits, takes a leave of absence, withdraws, or graduates), and continues for six months. Although a borrower is not required to make loan payments during this grace period, he/she may receive bills from his/her servicer. The grace period is a good time to communicate with the loan servicer and establish plans for loan repayment.
If a borrower re-enrolls and returns to at least half-time status before the end of the six-month grace period, loans will again enter in-school deferment. The borrower will receive the remaining portion of the grace period the next time he/she drops below half-time status. There is no grace period for Graduate PLUS loans.
Borrowers may defer Direct loans after they are no longer enrolled for various reasons, including:
- Economic hardship (borrower must be conscientiously seeking but unable to find full-time employment for up to three years, or have a family income below officially published poverty levels, or have monthly student loan payment obligations that exceed 20% of gross monthly income from full-time employment); and,
- Active duty service during a war or other military operation or national emergency, including qualifying National Guard duty (only available for Direct Loans first disbursed on or after July 1, 2001).
Borrowers who are unable to make their scheduled monthly payments may make a forbearance agreement with their lender (Direct Loan). During a period of forbearance, interest continues to accrue on both Direct Subsidized and Unsubsidized Loans. A borrower may request a forbearance to allow for any of the following:
- A short period during which he/she makes no payments;
- An extension of time for making payments; or
- A period during which he/she makes smaller payments than were originally scheduled.
Communications with Lender
The most important responsibility a borrower has is to maintain communication with the lender/servicer who holds/services their loan. A lender can make any number of adjustments to a loan’s payment schedule or defer payment completely when appropriate. It is the borrower’s responsibility to keep them apprised of any extenuating circumstances. Failure to do so can result in default. Students can find contact information for their lenders by accessing the National Student Loan Data System.
Contact AOMA Financial Aid
Estella Proctor, Director of Financial Aid