Student Loans for Full COA - recommendations? (Non-need-based)

Aug 10, 2019
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I didn’t find a specific section on SDN regarding loans for medical students, and there seems to be a lot of commercial lending options along with government loans. Student Loans will be Non Need Based and will need to cover full COA. Let’s please keep judgement related comments off this thread relating to affordability, parental contributions etc.

Can people with experience make some recommendations based on experience and hearing what other students have done that sounds like good ideas?

Government options - immediate accrual:
...The Stafford Direct Unsubsidized provides $42K-$47K/yr, about 6% interest, and over 1% origination fee.
...Grad Plus loans will make up difference but about 7% interest and over 4% origination fee.

I’ve seen some commercial lenders advertising variable rates, or fixed between 4-6%, with no origination fees, up to full COA.
 
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Kardio

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There’s a sub forum for this - although it’s not very active.


I’ll be taking federal all the way through and will consider refinancing after medical school.

You may be able to get private loans at a lower interest rate, but that may make you ineligible for some special repayment options.
 
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rdyotz

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I didn’t find a specific section on SDN regarding loans for medical students, and there seems to be a lot of commercial lending options along with government loans. Student Loans will be Non Need Based and will need to cover full COA. Let’s please keep judgement related comments off this thread relating to affordability, parental contributions etc.

Can people with experience make some recommendations based on experience and hearing what other students have done that sounds like good ideas?

Government options - immediate accrual:
...The Stafford Direct Unsubsidized provides $42K-$47K/yr, about 6% interest, and over 1% origination fee.
...Grad Plus loans will make up difference but about 7% interest and over 4% origination fee.

I’ve seen some commercial lenders advertising variable rates, or fixed between 4-6%, with no origination fees, up to full COA.

Private loans do not offer any protections. They do not get forbearance options, no income-based payments, ineligible for government payback for working in needed areas, etc. They are also heavily dependent on your credit rating, poor credit means you will be much higher interest and possible unable to get a loan.
 
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Cornfed101

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I have some private loans from undergrad and they aren't great. There are limits on deferment and forbearance. You also don't have access to IBR and similar programs (only available with federal loans), which are the bee's knees. Always utilize federal loans first. Right now I am on IBR during my gap year and my minimum payment is $0 for my federal loans. My minimum payment for my private loans is like $400. Federal loans just offer much more flexibility, which is well worth the few percentage points of interest (if you even get better terms).
 
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This seems like a great link (below) to a resource page explaining Income Based Repayment (IBR), and other Income Driven Repayment (IDR), PAYER (PAs as you earn), and REPAYER (revised payer) options. It also has a calculator estimator.

QUESTION: for IBR and RE/PAYER, it seems that qualified loans are forgiven after 20 years and then a taxable event on forgiven amount.
Does anyone know at what point in time a student can convert to IBR considering that Stafford Direct Unsubsidized, and Grad Plus loans immediately have interest accruing? Is one begins Repayment while in med school so they can start the IBR clock? Anyone doing a longer residency and even fellowship would then have about 10 years of high income (say $400K/yr) IBR worth of payments to make. This assumes $400k principal of med school loans to start.

Compared to say a 5 year accelerated live cheap payment plan after fellowship, I calculate it would total about $1M total payments as principle would have doubled by end of surgical fellowship after med school.

Please help me understand flaws in this thinking.

 

Zen Arcade

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I'd say if you know yourself, go with the private loans in place of Grad PLUS (still take out the full Stafford). If you are financially responsible you should be putting a good chunk of money towards your loans during residency anyway... These longer forbearance periods and repayment protections are good if you plan on only paying minimum amounts on loans, but if you already know how to live frugally, Grad PLUS will cost you a LOT of extra money. No origination fee and 4% interest rate (if you have good credit) will make a substantial difference in the total amount of money you have to pay on loans. Most advisers will tell you to take the Grad PLUS, but that's because the average resident probably does not plan on paying off their loans aggressively.
 
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This seems like a great link (below) to a resource page explaining Income Based Repayment (IBR), and other Income Driven Repayment (IDR), PAYER (PAs as you earn), and REPAYER (revised payer) options. It also has a calculator estimator.

QUESTION: for IBR and RE/PAYER, it seems that qualified loans are forgiven after 20 years and then a taxable event on forgiven amount.
Does anyone know at what point in time a student can convert to IBR considering that Stafford Direct Unsubsidized, and Grad Plus loans immediately have interest accruing? Is one begins Repayment while in med school so they can start the IBR clock? Anyone doing a longer residency and even fellowship would then have about 10 years of high income (say $400K/yr) IBR worth of payments to make. This assumes $400k principal of med school loans to start.

Compared to say a 5 year accelerated live cheap payment plan after fellowship, I calculate it would total about $1M total payments as principle would have doubled by end of surgical fellowship after med school.

Please help me understand flaws in this thinking.

Nice try, but the flaw in your thinking is that the government will allow you to enter IBR while you are a student, your income is expected to be zero, and you are still borrowing under the program. You cannot enter IBR while still in school, so the clock cannot start until graduation or withdrawal. While you can choose to either have interest accrue or pay it while in school, the loan is not in repayment while you are in school, and no principal payments are either required or expected, so you are ineligible to elect a repayment plan, such as IBR.

If you expect to have a high income, the loans will be largely or fully paid off before the required 20 or 25 years, so there will be little or nothing left to forgive, and you will have spent a ton of interest over the years while chasing the possibility of some taxable loan forgiveness at the end of the rainbow.
 
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BUT.....

The calculators are semi helpful to show traditional vs IBR vs PAYER.
However, even with the higher Grad Plus interest and initiation fees, if IBR must wait until Residency to begin the 10yr clock, the calculators can’t model surgical residency/fellowship salary of 5-7 years! Wouldn’t this leave only three to five years of high incomex10% before forgiveness with no tax event?
$400K principle borrowed
So say worst case ( to even account for the poverty deduction):
.... 5 years at say 10% of $60k salary = $30K in pmts
....+5 years at say 10% of $400k salary =$200K in pmts
.... Total $230K in pmts.
So a boat load of forgiveness because this doesn’t even show the capitalized and compounded loan growth.

***Where/ is my math wrong?
Is IBR approved for certified residency salaries?
 
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BUT.....

The calculators are semi helpful to show traditional vs IBR vs PAYER.
However, even with the higher Grad Plus interest and initiation fees, if IBR must wait until Residency to begin the 10yr clock, the calculators can’t model surgical residency/fellowship salary of 5-7 years! Wouldn’t this leave only three to five years of high incomex10% before forgiveness with no tax event?
$400K principle borrowed
So say worst case ( to even account for the poverty deduction):
.... 5 years at say 10% of $60k salary = $30K in pmts
....+5 years at say 10% of $400k salary =$200K in pmts
.... Total $230K in pmts.
So a boat load of forgiveness because this doesn’t even show the capitalized and compounded loan growth.

***Where/ is my math wrong?
Is IBR approved for certified residency salaries?
Where are you getting 10 year forgiveness from? That is for public service. That works for someone who is going into academic pediatrics anyway, but if your daughter is looking at a high paying specialty, the money she will lose by taking a much lower paying public interest job will be far greater than what she saves through loan forgiveness.

This works for people going into lower paying specialties anyway. There really is no effective way to game it for higher paying ones, so there is no reason to maximize borrowing on the theory that it will be forgiven later. If your daughter has the interest, talent and opportunity to go into a high paying specialty, she will lose far more than she will gain by manipulating her career path to try to take advantage of this, assuming it is even available when she needs it in the future.

The non public service IBR loan forgiveness is after either 20 or 25 years, depending on the program, and really results in little to no savings for a MD over just borrowing as little as possible up front or paying loans back as quickly as possible, due to the extended repayment period and the relatively high income MDs make.

Unfortunately, this really isn't a viable alternative to a merit based scholarship. If you are not able or willing to help your daughter out financially, then it is what it is, but you will save money in the long run by minimizing her borrowing over counting on a windfall through loan forgiveness. Think about it like this, if it were as easy as you seem to think it is, everyone would be doing it and nobody would be complaining about the high cost of medical school! Just my 2 cents!
 

Cornfed101

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Where are you getting 10 year forgiveness from? That is for public service. That works for someone who is going into academic pediatrics anyway, but if your daughter is looking at a high paying specialty, the money she will lose by taking a much lower paying public interest job will be far greater than what she saves through loan forgiveness.

You are mostly correct. You can still qualify for PSLF if you are working at any non-profit hospital, which isn’t super difficult to find.
 
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You are mostly correct. You can still qualify for PSLF if you are working at any non-profit hospital, which isn’t super difficult to find.
Yes, I am very well aware. The point I was trying to make is that anyone shooting for a high paying specialty, like her daughter apparently is, will give up way more in income working at the non-profit hospital than she could make in a for-profit private practice, so, if gaming the system to receive loan forgiveness is the goal, it will cost them more than they will gain.

The program is designed to make it possible for people to enter relatively low paying specialties without having to worry about being burdened by crushing amounts of debt for all of their working lives, and, for those people, the program works great. (I.e, the pay differential between for profit and non-profit is far lower for the lowering paying specialties than the higher paying ones.)
 

Cornfed101

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Yes, I am very well aware. The point I was trying to make is that anyone shooting for a high paying specialty, like her daughter apparently is, will give up way more in income working at the non-profit hospital than she could make in a for-profit private practice, so, if gaming the system to receive loan forgiveness is the goal, it will cost them more than they will gain.

The program is designed to make it possible for people to enter relatively low paying specialties without having to worry about being burdened by crushing amounts of debt for all of their working lives, and, for those people, the program works great. (I.e, the pay differential between for profit and non-profit is far lower for the lowering paying specialties than the higher paying ones.)

PSLF wasn’t designed for doctors at all. It was designed for teachers, police officers, nurses, etc. but doctors can definitely take advantage of it!
 
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PSLF wasn’t designed for doctors at all. It was designed for teachers, police officers, nurses, etc. but doctors can definitely take advantage of it!
Absolutely correct!!! But, due to the relatively high incomes doctors earn, the long payback period required for IBR, and the extreme income differential between non-profit and private practice for the competitive specialties, it's only really worthwhile for people doing non profit primary care, which is very good insofar as it incentivizes people to go into highly needed but less lucrative areas that they might not be able to justify otherwise due to the high levels of debt some people are carrying after graduation.
 
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Zen Arcade

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I would strongly caution anyone from putting their hope for repayment in PSLF. If you make only one mistake on the paperwork you are at risk for being ineligible. Depending on the political situation, this program could be shut down or downsized significantly. In the June 2019 PSLF Report, out of 100835 applications, 1216 people were granted loan forgiveness. (Public Service Loan Forgiveness (PSLF) Numbers Are Improving, But Is It Enough?) While I'm sure a huge chunk of those people who were denied didn't due their due diligence, the fact that only 1.2% were actually granted forgiveness is very concerning. Only go down this route if you absolutely know how to fill out the paperwork properly and feel confident that you will never miss a single payment. Even then, I would consider this to be a very high risk option - which is not what primary care physicians working for non-profits should be going for. Pay off your loans aggressively in residency and as an attending until you pay them off in full. You do not want to make the minimum payment for 10 years, only to find that your PSLF application was rejected due to a small error. It would be a very expensive mistake.
 
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I would strongly caution anyone from putting their hope for repayment in PSLF. If you make only one mistake on the paperwork you are at risk for being ineligible. Depending on the political situation, this program could be shut down or downsized significantly. In the June 2019 PSLF Report, out of 100835 applications, 1216 people were granted loan forgiveness. (Public Service Loan Forgiveness (PSLF) Numbers Are Improving, But Is It Enough?) While I'm sure a huge chunk of those people who were denied didn't due their due diligence, the fact that only 1.2% were actually granted forgiveness is very concerning. Only go down this route if you absolutely know how to fill out the paperwork properly and feel confident that you will never miss a single payment. Even then, I would consider this to be a very high risk option - which is not what primary care physicians working for non-profits should be going for. Pay off your loans aggressively in residency and as an attending until you pay them off in full. You do not want to make the minimum payment for 10 years, only to find that your PSLF application was rejected due to a small error. It would be a very expensive mistake.
Yes, yes, yes!!! Also, you neglected to mention that, given the wave of people who are first becoming eligible, and the likelihood that paperwork compliance is bound to improve going forward, program costs are going to explode in the future. An obvious way to mitigate future costs will be to tighten or eliminate eligibility for relative high earners, like doctors.

Since you can't even enroll until you leave school, it would be risky to plan on it being there in the future. It will be great if it is and you can benefit, but you are correct, it would be dangerous to borrow large amounts you don't otherwise need on the assumption that large amounts will be forgiven 14, 24 or 29 years in the future.
 
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Upon completion of med school it sounds like the following plan is most sound.
As a prerequisite, use only Federal Stafford Direct and Direct Plus student loans.

1. Assuminging surgical residency path, evaluate existence and forgiveness likelihood of PSLF program. Assume non-profit hospital attending position for three years after training and compare to private salaries. Calculate different of (hospital income - 3x10% + forgiveness capitalized total) and compare to
(for profit income difference for those 3years - total capitalized amount owed)

2. Use RE/PAYER program during all training to reduce in-training payments and total capitalization of interest. Then once done with training, determine if career path would lead to foregiveness and total payment savings over life of loan , and compare to the total payments by converting to private low interest loan with X years of affordable accelerated payments.
 
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Upon completion of med school it sounds like the following plan is most sound.
As a prerequisite, use only Federal Stafford Direct and Direct Plus student loans.

1. Assuminging surgical residency path, evaluate existence and forgiveness likelihood of PSLF program. Assume non-profit hospital attending position for three years after training and compare to private salaries. Calculate different of (hospital income - 3x10% + forgiveness capitalized total) and compare to
(for profit income difference for those 3years - total capitalized amount owed)

2. Use RE/PAYER program during all training to reduce in-training payments and total capitalization of interest. Then once done with training, determine if career path would lead to foregiveness and total payment savings over life of loan , and compare to the total payments by converting to private low interest loan with X years of affordable accelerated payments.
Do whatever you think is best for your family. The advice is to not over borrow on the assumption that loans for surgeons will be forgiven in the future, because, while nothing is guaranteed, it is more likely than not that forgiveness will not be available in 2034 for surgeons.

If you have to borrow anyway, hope for the best and prepare for the worst. If you don't have to borrow, the conservative advice would be to not borrow, but only you can properly weigh the risk/reward of incurring the unnecessary expense of interest accrual and origination fees (which will easily be tens of thousands of dollars during the four years she is in school, before you even know whether or not there will be a forgiveness program for her to enroll in) versus the possibility to forgiveness in the future.

I have a feeling you are trying to construct an artificial merit scholarship using this approach. If that's the case, there is a decent chance it will backfire on you. The program was not designed to provide taxpayer subsidies to wealthy (or soon to be wealthy) surgeons. As the costs of the program explode going forward, there is a very strong possibility the politicians will reign it in, and it will not be there when you need it.

Finally, I'm not sure that what you are thinking about has ever made sense for specialists such as surgeons. I don't know the numbers for sure, but I can't imagine private practice surgeons don't make over $100K more than their non-profit counterparts. There are lots of reasons to work for a non-profit (desire to teach, location, can't get a higher paying job, etc.), but leveraging loan forgiveness to make more money than you could make otherwise is not one of them for anyone in a high paying specialty. Good luck!!
 
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I have a feeling you are trying to construct an artificial merit scholarship using this approach. If that's the case, there is a decent chance it will backfire on you. The program was not designed to provide taxpayer subsidies to wealthy (or soon to be wealthy) surgeons. As the costs of the program explode going forward, there is a very strong possibility the politicians will reign it in, and it will not be there when you need it.

Finally, I'm not sure that what you are thinking about has ever made sense for specialists such as surgeons. I don't know the numbers for sure, but I can't imagine private practice surgeons don't make over $100K more than their non-profit counterparts. There are lots of reasons to work for a non-profit (desire to teach, location, can't get a higher paying job, etc.), but leveraging loan forgiveness to make more money than you could make otherwise is not one of them for anyone in a high paying specialty. Good luck!!

I really have no idea what you mean by the bolder line above.
The whole purpose of this thread is to educate myself and figure out the best course of action and plan ahead. Should it be a plan for non profit teaching, or private practice, there is still the necessity to plan so as to minimize total exp se and maximize options.

I’ve already demonstrated that some of these plans absolutely still make sense for surgeons who have to borrow $400K for med school whether you choose to believe it or now. Not sure why you keep indicating that there is possibility to not have to borrow this amount? Also, not sure why you keep excluding the possibility of a teaching non for profit hospital attending position after training, vs private practice; both are unknown at this point. Again, just trying to plan for maximizing options. And believe it or not, PAYER program even with 20yr and private or acted salary avg of $400K for years 8-20, can lead to savings with loan foregivenss according to my math. I expect that any program loan foregiveness will be grandfathered in for anyone who begins it. It will undergo a a other pass at this exercise once graduation time rolls around to evaluate interest rates at that time for refinancing etc.
 

PierreMD

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Take Fed loans so you have the most options. It's very prudent to become financially savvy right now so you know what to do when it's time to repay/refinance, but I would never bank on making it into a certain specialty. You never know what your situation will be in 4 years so having the most options is the best plan.

Check out Student Loan Planner's Excel sheet (get the full version). It's fairly comprehensive and gives you a great comparison of repayment options. Read their article for med students too. Run some hypotheticals in the SLP Excel sheet to get a feel what repayment might look like for you. If your debt is high enough (i.e. go to a private school like me :dead:), then IDR may still be advantageous even with a higher salary (specialists also have longer training that give the debt more time to grow).

Starting repayment in residency is almost always the best option. Using a Federal plan during residency will keep monthly payments low while still allowing you to fight some of the interest. You can refinance after residency if you want.

1. Your payments during residency count towards federal loan forgiveness, and the 10/20/25 years of repayment (120/240/300 monthly payments) do not need to be consecutive. You can go into deferment and start making qualified payments later.
2. If you do IDR, start saving up for the tax bomb. The Excel sheet is nice and gives you a monthly amount to set aside.
3. If you decide to refinance, you can do so at any time and as many times (as a servicer will take you). Once down this road, you should be shopping for a better rate at least once a year.

When the time comes, run the numbers and see what makes the most sense. The SPL Excel sheet is great, but I would double check my numbers just in case. Hiring a consultant may be worthwhile.

As usual, the best way to reduce debt has always been to save aggressively before school and live modestly during school in order to take out as little loans as possible. And, of course, pray the next president forgives all student loans.
 
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I really have no idea what you mean by the bolder line above.
The whole purpose of this thread is to educate myself and figure out the best course of action and plan ahead. Should it be a plan for non profit teaching, or private practice, there is still the necessity to plan so as to minimize total exp se and maximize options.

I’ve already demonstrated that some of these plans absolutely still make sense for surgeons who have to borrow $400K for med school whether you choose to believe it or now. Not sure why you keep indicating that there is possibility to not have to borrow this amount? Also, not sure why you keep excluding the possibility of a teaching non for profit hospital attending position after training, vs private practice; both are unknown at this point. Again, just trying to plan for maximizing options. And believe it or not, PAYER program even with 20yr and private or acted salary avg of $400K for years 8-20, can lead to savings with loan foregivenss according to my math. I expect that any program loan foregiveness will be grandfathered in for anyone who begins it. It will undergo a a other pass at this exercise once graduation time rolls around to evaluate interest rates at that time for refinancing etc.
I honestly don't understand what you don't understand! You are a full pay parent who is asking for advice on how to maximize loan forgiveness on full COA student loans. That would be a do-it-yourself government funded merit scholarship if it works. Good luck with that for a surgeon in 15 years!!!

You want to minimize total expenses? Try borrowing nothing and not paying interest and origination fees under the assumption that a program meant to encourage people to become teachers or public interest lawyers will be available to surgeons in 2034. And this advice has nothing to do with "Let’s please keep judgement related comments off this thread relating to affordability, parental contributions etc." This is just common sense conservative advice, but, of course, you should do whatever is best for you and your daughter. The worst that could happen is that you (she) pay tens of thousands of dollars in unnecessary interest and fees, you discover she is either not eligible for the program, it no longer exists when it's time for her to sign up for it (not now, but when she graduates in 4 years), or it will cost her more in lost income than she will make through loan forgiveness (you never once stated anything other than money was driving this decision) and you pay off the loans at that time. It's only money!!! :)
 
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You want to minimize total expenses? Try borrowing nothing and not paying interest and origination fees under the assumption that a program meant to encourage people to become teachers or public interest lawyers will be available to surgeons in 2034. And this advice has nothing to do with "Let’s please keep judgement related comments off this thread relating to affordability, parental contributions etc." This is just common sense conservative advice, but, of course, you should do whatever is best for you and your daughter. The worst that could happen is that you (she) pay tens of thousands of dollars in unnecessary interest and fees, you discover she is either not eligible for the program, it no longer exists when it's time for her to sign up for it (not now, but when she graduates in 4 years), or it will cost her more in lost income than she will make through loan forgiveness (you never once stated anything other than money was driving this decision) and you pay off the loans at that time. It's only money!!! :)
You keep making this assertion in bold above, WHY? I keep indicating this is Not an option. Full CoA will get borrowed, hence the need for this exercise. It’s as if you keep trying to derail or change this thread’s original premise.

And math would show that zero loans isn’t even always the lowest cost if loan forgiveness is a likely occurrence. Play around with the Student Loan Planner Calculator spreadsheet.
 
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You keep making this assertion in bold above, WHY? I keep indicating this is Not an option. Full CoA will get borrowed, hence the need for this exercise. It’s as if you keep trying to derail or change this thread’s original premise.

And math would show that zero loans isn’t even always the lowest cost if loan forgiveness is a likely occurrence. Play around with the Student Loan Planner Calculator spreadsheet.
Okay -- no judgment -- do what you have to do. If borrowing less than full COA is not an option, then that's what your daughter will be doing whether or not loan forgiveness exists in the future. You are choosing to ignore the common wisdom that loan forgiveness is never a "likely" outcome, and certainly not for a future surgeon who hasn't even entered med school yet.

In any event, you have nothing to worry about until she enters repayment in four years. So just max out the federal programs now, and refinance into private programs after graduation if the forgiveness programs don't exist or she is ineligible then. And, once again, if she wants to do academic medicine anyway, great, she might see some benefit, assuming it exists. If she cares about money as much as you do, however, it is extremely unlikely that she will save more through loan forgiveness than she will lose in higher salary as a surgeon outside a non-profit.
 

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