IBR/PSLF is a sure thing

My vote for most naive comment of 2013!

Government is going to do whatever is politically expedient then retroactively justify it somehow, because what are you going to do? Nothing.

How many law professors have written about how impossible or illegal or unconstitutional the actions of the last 12 years have been? We're talking about thousands of books on this topic. It changes nothing.

PSLF is a loss anyways unless you training for a long time (eg surgery + fellowship) or you end up in a low paying specialty. Most, but not all, public sector jobs pay between 50% and 75% of private practice positions.

I think IBR is probably here to stay, but PSLF might not be. Remember, no one has actually used PSLF yet as the first group is eligible 2016-2017.

notbobtrustme said:

PSLF is a loss anyways unless you training for a long time (eg surgery + fellowship) or you end up in a low paying specialty. Most, but not all, public sector jobs pay between 50% and 75% of private practice positions.

Click to expand...

But then there are those that choose to do academic medicine.

IBR is in the MPN, they won't be able to get rid of it if they wanted to. PSLF however is easy to get rid of, and they will have every incentive to do so in the future. I don't think the high paying procedural specialties will remain high paying, CMS is gunning for them bit by bit and if the RUC doesn't cut reimbursement rates, IPAB will. It may be very hard to pay off loans in the future.

notbobtrustme said:

PSLF is a loss anyways unless you training for a long time (eg surgery + fellowship) or you end up in a low paying specialty. Most, but not all, public sector jobs pay between 50% and 75% of private practice positions.

Click to expand...

That works on the assumption that everyone can land a top 50th+ %ile private practice job. Because someone has to make up the bottom 50th %ile, amirite? Or that there aren't benefits to academic work that don't exist in academia. It may not be a total loss, particularly if someone is looking for something other than dollar signs.

The "Pay As You Earn" plan also just came into effect which allows for even lower monthly payments compared to IBR.

Textbookversion said:

So, like many medical students I plan on spending ages going through residency and fellowship, making IBR and PSLF a really good deal.

I've had a number of people question whether that program was going to stay around. I thought for political reasons this was an unfounded worry. Apparently I have even less reason to worry according to this article:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2179625

It is written by a law professor addressing a book that talks about the crisis in legal education. That's not really important to us. What is important is that according to him stuff like IBR is baked into the master promissory note you sign electronically when you take out loans.

Basically, the federal government has a contractual obligation to maintain those programs for current borrowers. So we don't have to worry. He's a law professor and the responses I've seen to that article by other law professors/lawyers agree with his analysis on IBR/PSLF.

So umm that's good. Thought I'd share.

Click to expand...

Do you not understand that they can change the law?

I.e. - yes we said you had to pay 10 years, how about 15 years?

Just because they said they will do it doesn't mean they can't change HOW they do it... and if they can change the HOW then they can change it enough that it would be minimally beneficial (i.e. cost a lot less for them).

Too bad I won't see how this debate ends, as it's a 15 year long debate - but if you're banking on the federal government writing a 300k check to you as a "rich overpaid" physician... well, I can't wait to see that.

hrandani said:

My vote for most naive comment of 2013!

Government is going to do whatever is politically expedient then retroactively justify it somehow, because what are you going to do? Nothing.

How many law professors have written about how impossible or illegal or unconstitutional the actions of the last 12 years have been? We're talking about thousands of books on this topic. It changes nothing.

Click to expand...

Exactly.... politicians do whatever benefits them. I don't think the program could exist very long once they start writing 200k checks to doctors. They wouldn't last very long at all as soon as the public learns about it.


-------------

edit: I read some of the other posts... agreed. PSLF is what I'm saying will go bye bye. As for IBR - lol, no one cares about IBR. Basically your asking to pay 8% or whatever on $ for longer!? Do you realize there are credit cards around this percentage (I think I have a credit card lower than some of my student loans). Also, home mortgages are going around 3% right now... so yeah, the government and lenders will GLADLY allow you to keep a 8 or 9% loan and pay very little on it. They will let you do that over 40 or 50 years... The return on investment for students loans is one of the BEST returns right now and they are NON bankrupt-able. So yeah, you can keep that piece of **** for a long long time.

Borrowing money is very cheap right now, very cheap. Except for student loans. They make a killing on those.

gasblaster said:

The "Pay As You Earn" plan also just came into effect which allows for even lower monthly payments compared to IBR.

Click to expand...

When a lender has a incredibly high interest rate, they will let you pay the lowest possible payment on it because then they collect more interest. I'm sure there will be a $10 a month payment soon or a "take a year off of payments" option. More and more interest for the lender. You can't bankrupt the loan and you have a good income, that money is coming back to them (low-risk).

gasblaster said:

The "Pay As You Earn" plan also just came into effect which allows for even lower monthly payments compared to IBR.

Click to expand...

I had not heard about this till you posted and just looked it up. Could someone use it in combination with PSLF like the old IBR program? Or do you have to make payments for 20 years?

Dkr said:

I had not heard about this till you posted and just looked it up. Could someone use it in combination with PSLF like the old IBR program? Or do you have to make payments for 20 years?

Click to expand...

From my understanding, the PAYE can be used with the PSLF. However, the same question applies to it as well... the permanency of the PSLF.

OneMoreRound said:

Too bad I won't see how this debate ends, as it's a 15 year long debate - but if you're banking on the federal government writing a 300k check to you as a "rich overpaid" physician... well, I can't wait to see that.

Click to expand...

I don't get it... where are you going?

Anyway, the vast majority of the doctors who would end up qualifying for PSLF are going to be in primary care or academia. Primary care is big now. Maybe they'd restrict the program to certain specialties like they do with NHSC right now, but it's not like they'll be writing a whole lot of these checks to specialists making huge bucks in PP. Those people will be out and making $$ well before the ten year mark anyway.

Exactly.... politicians do whatever benefits them. I don't think the program could exist very long once they start writing 200k checks to doctors. They wouldn't last very long at all as soon as the public learns about it.

Click to expand...

See above. How exactly is this going to be that much different from the NHSC LRP?

edit: I read some of the other posts... agreed. PSLF is what I'm saying will go bye bye. As for IBR - lol, no one cares about IBR.

Click to expand...

No one cares about IBR?? OK. Talk to any one of the tons of residents who are in IBR right now because it'd be incredibly difficult for them to cover the $1,500/month loan payment they'd be looking at otherwise. You can't take deferment just because you're in residency any more.

PAYE actually looks like a pretty big benefit for residency. Interest doesn't capitalize under PAYE, and the payments will be considerably smaller than under IBR because it is AGI - fed poverty level instead of AGI alone. Residency pay is so piss poor that AGI - fed pov level is probably pretty small for many.

gravitywave said:

I don't get it... where are you going?

Anyway, the vast majority of the doctors who would end up qualifying for PSLF are going to be in primary care or academia. Primary care is big now. Maybe they'd restrict the program to certain specialties like they do with NHSC right now, but it's not like they'll be writing a whole lot of these checks to specialists making huge bucks in PP. Those people will be out and making $$ well before the ten year mark anyway.



See above. How exactly is this going to be that much different from the NHSC LRP?

Click to expand...

Sure, I'll buy that they will have programs for primary care. I don't think that's an issue because they make much less than other docs. I'm talking more about the people who will do surgery and fellowships on fellowships, earning 400-600k and expecting a handout. I was saying that won't happen.

No one cares about IBR?? OK. Talk to any one of the tons of residents who are in IBR right now because it'd be incredibly difficult for them to cover the $1,500/month loan payment they'd be looking at otherwise. You can't take deferment just because you're in residency any more.

Click to expand...

My writing wasn't clear. When I said, no one cares, I'm talking about the people who are lending the money... obviously, it's nice to make a lower payment, but I'm saying the lender will have a huge smile on their face if you take twice as long to pay back a 200k loan at 8.5%. Banks are offering good borrowers 2.5%... if you are a terrible high risk borrower, they may offer 7 or 8% if there is strong collateral behind the money. Student loans are higher than that. Basically, there is no low risk loan that offers such a ****ty rate. So yes, the borrowers could care less if you spend 100 years paying off that incredibly high rate because they are charging you a rate that a person with a sub 620 credit score would get.

I'm sure people like the option to make no payments on credit cards for 12 months, but the bank will gladly do that if they know you have collateral they can capture. So yeah, when I say they don't care (lenders), I mean they are glad to extend the term on a ****ty loan (for the borrower). IBR is to the lenders benefit, if you only pay 15% when you can pay 30% because of that cap, the lender is just profiting tons on that extremely high rate. In that respect, I think IBR will be "even better" i.e. lower payment options, because they are realizing it's an easy way to make money on a crowd that doesn't exactly understand finance. The example of not being able to afford $1500... people usually figure out how to afford what they want to. They probably drive a better car, live in a better home, etc. just because they have that payment cap... instead, better to make that $1500 payment and adjust living means. The student loan rates are the worst in the last 20-30 years - historically terrible. These rates have never in history been triple of the home mortgage rates, or higher than credit card rates. They will let you have that money for eternity if you want to pay the interest.

I may be mistaken, but the emergence of PAYE last month, during the "midst" of our economic challenges is a good indicator that loan repayment programs such as IBR are here to stay. Facing a possible fiscal cliff, one would expect these repayment assistance programs to phase out. Instead, an additional, better repayment option is made available.

Ibn Alnafis MD said:

I may be mistaken, but the emergence of PAYE last month, during the "midst" of our economic challenges is a good indicator that loan repayment programs such as IBR are here to stay. Facing a possible fiscal cliff, one would expect these repayment assistance programs to phase out. Instead, an additional, better repayment option is made available.

Click to expand...

I don't think the issue is whether IBR or PAYE will be maintained, it's the application of those payments toward PSLF. Without PSLF, we just end up just delaying our loan repayment until no longer qualifying for IBR or PAYE and make significantly higher monthly payments to pay back the loan plus interest.

Ibn Alnafis MD said:

I may be mistaken, but the emergence of PAYE last month, during the "midst" of our economic challenges is a good indicator that loan repayment programs such as IBR are here to stay. Facing a possible fiscal cliff, one would expect these repayment assistance programs to phase out. Instead, an additional, better repayment option is made available.

Click to expand...

I really don't think you guys get it. These new plans would never go away in recession. These are the best loans going right now. These are the Ferrari's of loans - 100% chance of repayment and a terribly high rate.

Borrowing money in America today = very cheap

Mortgage: 2.5%
Credit cards: 7-10%
Car loans: 5%

Investors:

CD pays: 1.5% (low risk)
Stocks/mutual funds: 7-12% (moderate risk)
Student Loans: 8-9% (super low risk)

IBR and even lower payment plans are a huge benefit to the lender and not the student. They will give you all the payment plans you want... they will probably make a $20 a month payment option for you guys who don't understand interest rates. They are earning 3-4 times the amount they get on a mortgage loan --- and with NO risk. The student loans are all paid back. Mortgages default all the time and still have 1/3 the rate.

gasblaster said:

I don't think the issue is whether IBR or PAYE will be maintained, it's the application of those payments toward PSLF. Without PSLF, we just end up just delaying our loan repayment until no longer qualifying for IBR or PAYE and make significantly higher monthly payments to pay back the loan plus interest.

Click to expand...

That's true, but it only affects those with low debts (<200K) and high incomes (>300K).

OneMoreRound said:

I really don't think you guys get it. These new plans would never go away in recession. These are the best loans going right now. These are the Ferrari's of loans - 100% chance of repayment and a terribly high rate.

Borrowing money in America today = very cheap

Mortgage: 2.5%
Credit cards: 7-10%
Car loans: 5%

Investors:

CD pays: 1.5% (low risk)
Stocks/mutual funds: 7-12% (moderate risk)
Student Loans: 8-9% (super low risk)

IBR and even lower payment plans are a huge benefit to the lender and not the student. They will give you all the payment plans you want... they will probably make a $20 a month payment option for you guys who don't understand interest rates. They are earning 3-4 times the amount they get on a mortgage loan --- and with NO risk. The student loans are all paid back. Mortgages default all the time and still have 1/3 the rate.

Click to expand...

IBR and PAYE are also great deals for many future doctors. I'm projecting to graduate medical school with 400K in debts. These repayment programs will afford me with the option to choose a specialty that I enjoy regardless of its financial outcomes.

Ibn Alnafis MD said:

IBR and PAYE are also great deals for many future doctors. I'm projecting to graduate medical school with 400K in debts. These repayment programs will afford me with the option to choose a specialty that I enjoy regardless of its financial outcomes.

Click to expand...

Do you know how compound interest and loans work? By electing to make smaller payments, you will pay extraordinarily more over the life of the loan because of interest. Depending upon the principle it is entirely possible that you will pay double or more the principle at the end of it all. That's why these payment programs are a bad deal. They should only be used when necessary and for as little as possible at that. The only exception, of course, being if forgiveness through PLSF is still possible, but I'm with others in thinking that it's questionable whether that program will continue to exist. Perhaps we can hope to get grandfathered in, but I would still plan as if it won't be around. That way you're prepared for a worst case scenario. I honestly could not fathom paying $400K in principle back using IBR sans forgiveness. You could possibly pay up to a million bucks back depending upon the loans you receive.

(sent from my phone)

NickNaylor said:

Do you know how compound interest and loans work? By electing to make smaller payments, you will pay extraordinarily more over the life of the loan because of interest. Depending upon the principle it is entirely possible that you will pay double or more the principle at the end of it all. That's why these payment programs are a bad deal. They should only be used when necessary and for as little as possible at that. The only exception, of course, being if forgiveness through PLSF is still possible, but I'm with others in thinking that it's questionable whether that program will continue to exist. Perhaps we can hope to get grandfathered in, but I would still plan as if it won't be around. That way you're prepared for a worst case scenario. I honestly could not fathom paying $400K in principle back using IBR sans forgiveness. You could possibly pay up to a million bucks back depending upon the loans you receive.

(sent from my phone)

Click to expand...

Again, IBR is a great deal for those with large debts and lowish salaries. For someone earning 200K/year paying back 400K using IBR is a much more economically sound plan that utilizing the standard 10-year term. To put it in numbers, with IBR the annual payment amount will be less than 27K. That's less than 600K in total payments after 25 years (including residency). Similarly, with the standard 10-year repayment plan, the total amount payed on 400K debt at 7.3% is approximately 600K. The difference is that with IBR one has the flexibility to make minimum payments during residency so not all of the resident's earnings go toward paying the loans. Another thing to consider is inflation. 600K over 25 years has a much less value that 600K over 10 years.

Bottom line, IBR is great for those whose annual salary is a lot less that the total debt.

Ibn Alnafis MD said:

Again, IBR is a great deal for those with large debts and lowish salaries. For someone earning 200K/year paying back 400K using IBR is a much more economically sound plan that utilizing the standard 10-year term. To put it in numbers, with IBR the annual payment amount will be less than 27K. That's less than 600K in total payments after 25 years (including residency). Similarly, with the standard 10-year repayment plan, the total amount payed on 400K debt at 7.3% is approximately 600K. The difference is that with IBR one has the flexibility to make minimum payments during residency so not all of the resident's earnings go toward paying the loans. Another thing to consider is inflation. 600K over 25 years has a much less value that 600K over 10 years.

Bottom line, IBR is great for those whose annual salary is a lot less that the total debt.

Click to expand...

With IBR you won't be paying back 600k, you'll be paying back 1500k. The longer you draw out a high interest loan, the more interest you will pay. Next time you get a credit card bill, look at the minimum payment and how much interest you would pay over the life of that balance. For something like 200 bucks, if you pay the minimum, you end up paying 600 bucks over several years. Under no circumstances I can think of, except for picking blockbuster stocks (aka Apple in 2000), is this a good idea.

Secondly, most attending physicians won't qualify for IBR once they graduate residency, no matter their debt load.

notbobtrustme said:

With IBR you won't be paying back 600k, you'll be paying back 1500k. The longer you draw out a high interest loan, the more interest you will pay. Next time you get a credit card bill, look at the minimum payment and how much interest you would pay over the life of that balance. For something like 200 bucks, if you pay the minimum, you end up paying 600 bucks over several years. Under no circumstances I can think of, except for picking blockbuster stocks (aka Apple in 2000), is this a good idea.

Secondly, most attending physicians won't qualify for IBR once they graduate residency, no matter their debt load.

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Where did you get the "1500K" from?

I just ran the numbers in the calculator and I got that the total amount paid back using IBR is 573K over 25 years. With the standard 10-year term, the number is 565K.

http://www.finaid.org/calculators/scripts/ibr.cgi

"To qualify for IBR, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your IBR-eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under IBR."

http://studentaid.ed.gov/repay-loans/understand/plans/income-based

Ibn Alnafis MD said:

Where did you get the "1500K" from?

I just ran the numbers in the calculator and I got that the total amount paid back using IBR is 573K over 25 years. With the standard 10-year term, the number is 565K.

http://www.finaid.org/calculators/scripts/ibr.cgi

"To qualify for IBR, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your IBR-eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under IBR."

http://studentaid.ed.gov/repay-loans/understand/plans/income-based

Click to expand...

What assumptions are you using in that calculator? Even very generally $173K on $400K principle at 6.9% (assuming you get that rate on all of your principle) sounds WAY too low for 25 years of repayment. I agree that $1.5 million is an extreme overestimate, but $573K also seems like an extreme underestimate. I will graduate with roughly $130K of debt and even with all of my loans at the Stafford rate or less I will be repaying about 125% of the principle if I were to use IBR. Given the gigantic size of your principle plus the capitalized interest that accumulates during school, I find it hard to believe that that is all you're going to end up paying.

(sent from my phone)

NickNaylor said:

What assumptions are you using in that calculator? Even very generally $173K on $400K principle at 6.9% (assuming you get that rate on all of your principle) sounds WAY too low for 25 years of repayment. I agree that $1.5 million is an extreme overestimate, but $573K also seems like an extreme underestimate. I will graduate with roughly $130K of debt and even with all of my loans at the Stafford rate or less I will be repaying about 125% of the principle if I were to use IBR. Given the gigantic size of your principle plus the capitalized interest that accumulates during school, I find it hard to believe that that is all you're going to end up paying.

(sent from my phone)

Click to expand...

Perhaps you are forgetting that the remaining balance is forgiven after 25 years. In my scenario above, 400K (the entire principle because the monthly payments barely covered interests) will remain unpaid by the end of the repayment schedule. The forgiven amount will be taxed as if it were income. Thus, one would end up paying 130K-180K of taxes on the 400K "forgiven" balance. Add that to the 573 and that will give you the exact amount repaid. Still good deal in my opinion.

NickNaylor said:

What assumptions are you using in that calculator? Even very generally $173K on $400K principle at 6.9% (assuming you get that rate on all of your principle) sounds WAY too low for 25 years of repayment. I agree that $1.5 million is an extreme overestimate, but $573K also seems like an extreme underestimate. I will graduate with roughly $130K of debt and even with all of my loans at the Stafford rate or less I will be repaying about 125% of the principle if I were to use IBR. Given the gigantic size of your principle plus the capitalized interest that accumulates during school, I find it hard to believe that that is all you're going to end up paying.

(sent from my phone)

Click to expand...

I actually underestimated my repayment, and it actually proves my point even further. Use the AAMC's Medloans Calculator (https://services.aamc.org/30/first/home - free for med students). It's a super simplified interface that requires less input (and, therefore, likely more accurate results since you aren't inputting a lot of that data) than the calculator you linked to. On $113k of loans - my actual loan burden - I would pay roughly $190k total using IBR.

I took the liberty of putting your situation into this calculator using some very rough estimates and assumptions:

-You had access only to Perkins ($5k/year for all years), subsidized loans during undergrad ($6k/year), and unsubsidized loans during undergrad ($14k/year) and med school ($70k/year); note that this isn't realistic because these amounts exceed Stafford limits, meaning you would likely get loans at a higher interest rate unless you're able to get favorable loans from somewhere

-$100k of your $400k debt came from undergrad ($25k/year); the remainder came from med school ($75k/year for a total of $300k)

-You use IBR as your sole repayment plan during residency and beyond

-I assumed a $50k/yr resident salary (a somewhat rough average) and a $200k/yr attending salary (your number) and a four year residency (again, a rough average; your total repayment will be slightly less with a 3 year residency or more for a longer residency)

With those assumptions, these are the numbers the calculator spits out:

-A total repayment of $692,914 using standard (10 year) repayment, which would absorb 45% of your monthly attending income

-A total repayment of $971,103 using IBR - $2,673/mo during residency and $5,272/mo as an attending. If the PLSF stays, $486,489 would be forgiven, leaving you with a total of $484,614 to be repaid. You are correct that that is a "great deal," but no one would disagree with you. PLSF is awesome. If, on the other hand, PLSF does NOT stay but the IBR forgiveness stays (i.e., your balance is discharged after 25 years of payments), you would have $108,848 forgiven, leaving you with $862,255 paid back. If neither program survives, then you repay the full $971,103. Neither of those - including the IBR forgiveness - is what I would call a "great deal."

Again, I have no idea what you put into the calculator in your last post, but $573k in total repayment after 25 years is flat-out wrong unless you have received extremely favorable loans during undergrad and will receive similar loans during med school. Even just using federal loan programs, though, you would pay WAY more than $573k over the lifetime of the loan if you repaid using IBR.

I'm not trying to be an ******* here, but either you're in a special situation most people aren't in or you are making serious mistakes in the assumptions you are making regarding repayment.

Ibn Alnafis MD said:

Perhaps you are forgetting that the remaining balance is forgiven after 25 years. In my scenario above, 400K (the entire principle because the monthly payments barely covered interests) will remain unpaid by the end of the repayment schedule. The forgiven amount will be taxed as if it were income. Thus, one would end up paying 130K-180K of taxes on the 400K "forgiven" balance. Add that to the 573 and that will give you the exact amount repaid. Still good deal in my opinion.

Click to expand...

See my calculations above. I'm really interested in seeing what assumptions you made in your calculation. My guess is that calculator isn't taking into account that the interest on your loans is capitalizing during undergrad and med school. That's really where the interest gets you as you will accumulate SUBSTANTIAL interest during school, leaving you with an even larger principle to deal with once you start residency.

Alright. It appears to me that you don't fully understand how IBR works.

First, there's no way on earth a resident pays 2700/month under IBR. Once you qualify for IBR, your monthly payments are calculated using your income, not your debt. It doesn't matter whether you owe 130K or 400K, your payments under IBR will be the same. Few months ago, I read a post here on SDN by a resident whose monthly payment under IBR is Zero.

Second, 5200/month for someone earning 200K is more than double the monthly payment for someone with 200k salary. Again, the monthly payment is determined using the 200K income, not the amount of debt.

The total payment per YEAR is determined by multiplying adjusted income by 0.15. Therefore, a resident who is single and earning 50K/year is expected to pay $418/month. Similarly, an attending earning 200K/year would pay $2200/month.

http://studentaid.ed.gov/sites/default/files/income-based-repayment.pdf

As you see, the monthly payment doesn't even cover the accruing interests, much less the principle amount borrowed. The remaining PRINCIPLE balance after 25 years will be forgive and taxed.

I am sorry, but I couldn't access the calculator you provided because I'm not a medical student. However, if you're unhappy with the calculator I used in my previous post, I provide you here with another one.

http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator

I hope this settles the disagreement.

p.s. My projected 400K debt is the money I'll owe walking out of med school (including undergrad tuition and interests).

When I used to help people in financial quandaries, I would flip the script on them.

Let's say the payment plan DIDN'T exist and you had to pay back 5200 a month and some guy walked by and said, "Hey, looks like times are tough for you. I will give you $2700 extra each month at 9% interest. How about that?"

Virtually no one in their right mind would take this offer... So wait? You're offering me nearly 10% on a loan? I can get a personal loan for half that, heck there are even credit cards for less, mortgages are 2.5%, why would I borrow an extra $30,000 per year at a ridiculous rate? I think we can find a way to make this other situation work.

If you flip the situation, everyone would say no... but since the money is already borrowed and on credit, no problem, I don't need to pay that back.

The hilarious thing about all this, "Oh, after 25 years everything is forgiven" talk is that it is 100% contingent upon the political climate. I've also heard if you miss ONE payment, the whole deal is shot. If you know anything about financial companies and people losing a payment or something not posting or some electronic error that didn't transfer properly, etc. then you would realize you are in a very precarious situation hoping to have someone forgive 200k or something. So sure, I 100% agree with you that if you can get someone to give you a few hundred grand then not paying your loan is a good idea. Funny thing is, all they have to do is change the filing status of the hospital you work for, 1 year, and you are out - of we used to be non profit, but 7 years in they changed their filing status and you weren't told - boom - 200k-300k mistake. Congress changes their mind - boom - 200k-300k mistake.

Medicare will be around forever... 20 years ago everyone thought that. Don't just assume a 25 year payback program will be around. Look, I'm not trying to rain on your parade, I really do hope you get your $, but I've also been around the block and you're being sold a real ****ty deal. FOLLOW THE MONEY... who gets that 25 years in interest???? Who is to profit if they pull the plug? Think about it.

NickNaylor said:

I actually underestimated my repayment, and it actually proves my point even further. Use the AAMC's Medloans Calculator (https://services.aamc.org/30/first/home - free for med students). It's a super simplified interface that requires less input (and, therefore, likely more accurate results since you aren't inputting a lot of that data) than the calculator you linked to. On $113k of loans - my actual loan burden - I would pay roughly $190k total using IBR.

I took the liberty of putting your situation into this calculator using some very rough estimates and assumptions:

-You had access only to Perkins ($5k/year for all years), subsidized loans during undergrad ($6k/year), and unsubsidized loans during undergrad ($14k/year) and med school ($70k/year); note that this isn't realistic because these amounts exceed Stafford limits, meaning you would likely get loans at a higher interest rate unless you're able to get favorable loans from somewhere

-$100k of your $400k debt came from undergrad ($25k/year); the remainder came from med school ($75k/year for a total of $300k)

-You use IBR as your sole repayment plan during residency and beyond

-I assumed a $50k/yr resident salary (a somewhat rough average) and a $200k/yr attending salary (your number) and a four year residency (again, a rough average; your total repayment will be slightly less with a 3 year residency or more for a longer residency)

With those assumptions, these are the numbers the calculator spits out:

-A total repayment of $692,914 using standard (10 year) repayment, which would absorb 45% of your monthly attending income

-A total repayment of $971,103 using IBR - $2,673/mo during residency and $5,272/mo as an attending. If the PLSF stays, $486,489 would be forgiven, leaving you with a total of $484,614 to be repaid. You are correct that that is a "great deal," but no one would disagree with you. PLSF is awesome. If, on the other hand, PLSF does NOT stay but the IBR forgiveness stays (i.e., your balance is discharged after 25 years of payments), you would have $108,848 forgiven, leaving you with $862,255 paid back. If neither program survives, then you repay the full $971,103. Neither of those - including the IBR forgiveness - is what I would call a "great deal."

Again, I have no idea what you put into the calculator in your last post, but $573k in total repayment after 25 years is flat-out wrong unless you have received extremely favorable loans during undergrad and will receive similar loans during med school. Even just using federal loan programs, though, you would pay WAY more than $573k over the lifetime of the loan if you repaid using IBR.

I'm not trying to be an ******* here, but either you're in a special situation most people aren't in or you are making serious mistakes in the assumptions you are making regarding repayment.

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Good calculations.

One thing you all are forgetting, which is very easy to forget, is TAXES... the tax man cometh.

Let's say they do forgive 480k of your loan, I very highly doubt they would, but let's say they do. You realize that is taxable income right? They don't just write you a check. So they forgive half a million and you earn 200k normal income, your income bracke that year is now 700k, lets say you live in cali? Well, guess what, you are paying 50% of that money in taxes! Ha, so you are going to pay ~40% income tax and 10% state income tax in cali, that's 350k in annual taxes!!! That's more money that you actually earned that year, so you would need to take out a loan to pay off your forgiveness tax.

This is assuming the gov't doesn't say, "hey, why don't we raise the taxable income amount on forgiveness of loans? We don't have any money... all forgiven loans will now be taxed at 55% instead of 37%" Anything can happen, that raises your taxes that year to 450k!

I didn't use exact calculations, just round figures for simplicity. But you really have no idea what you're getting into if you think you're going to roll around with 400k+ in principle at a high rate counting on uncle sam to bail you out. Talk about a nightmare.

notbobtrustme said:

With IBR you won't be paying back 600k, you'll be paying back 1500k. The longer you draw out a high interest loan, the more interest you will pay. Next time you get a credit card bill, look at the minimum payment and how much interest you would pay over the life of that balance. For something like 200 bucks, if you pay the minimum, you end up paying 600 bucks over several years. Under no circumstances I can think of, except for picking blockbuster stocks (aka Apple in 2000), is this a good idea.

Secondly, most attending physicians won't qualify for IBR once they graduate residency, no matter their debt load.

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Someone who gets it.

Please guys, listen to this advice. If you want to know how finance companies make money. Check out your credit card. The fact that student loans are beginning credit card type payments and promising you refunds after a few decades should scare the hell out of you.

NickNaylor said:

I actually underestimated my repayment, and it actually proves my point even further. Use the AAMC's Medloans Calculator (https://services.aamc.org/30/first/home - free for med students). It's a super simplified interface that requires less input (and, therefore, likely more accurate results since you aren't inputting a lot of that data) than the calculator you linked to. On $113k of loans - my actual loan burden - I would pay roughly $190k total using IBR.

I took the liberty of putting your situation into this calculator using some very rough estimates and assumptions:

-You had access only to Perkins ($5k/year for all years), subsidized loans during undergrad ($6k/year), and unsubsidized loans during undergrad ($14k/year) and med school ($70k/year); note that this isn't realistic because these amounts exceed Stafford limits, meaning you would likely get loans at a higher interest rate unless you're able to get favorable loans from somewhere

-$100k of your $400k debt came from undergrad ($25k/year); the remainder came from med school ($75k/year for a total of $300k)

-You use IBR as your sole repayment plan during residency and beyond

-I assumed a $50k/yr resident salary (a somewhat rough average) and a $200k/yr attending salary (your number) and a four year residency (again, a rough average; your total repayment will be slightly less with a 3 year residency or more for a longer residency)

With those assumptions, these are the numbers the calculator spits out:

-A total repayment of $692,914 using standard (10 year) repayment, which would absorb 45% of your monthly attending income

-A total repayment of $971,103 using IBR - $2,673/mo during residency and $5,272/mo as an attending. If the PLSF stays, $486,489 would be forgiven, leaving you with a total of $484,614 to be repaid. You are correct that that is a "great deal," but no one would disagree with you. PLSF is awesome. If, on the other hand, PLSF does NOT stay but the IBR forgiveness stays (i.e., your balance is discharged after 25 years of payments), you would have $108,848 forgiven, leaving you with $862,255 paid back. If neither program survives, then you repay the full $971,103. Neither of those - including the IBR forgiveness - is what I would call a "great deal."

Again, I have no idea what you put into the calculator in your last post, but $573k in total repayment after 25 years is flat-out wrong unless you have received extremely favorable loans during undergrad and will receive similar loans during med school. Even just using federal loan programs, though, you would pay WAY more than $573k over the lifetime of the loan if you repaid using IBR.

I'm not trying to be an ******* here, but either you're in a special situation most people aren't in or you are making serious mistakes in the assumptions you are making regarding repayment.

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IBR has been changed and PAYE is now available as well. The AAMC calculator you used is not updated to reflect this. The new terms are 10% AGI and 20 years, PAYE allows you to subtract fed poverty level from AGI and also does not allow interest to capitalize. Under PAYE, the average general IM physician comes out much better than the standard 10 year payment term. Assuming 200k as we have been for income, one should be able to take atleast 30k off in tax deductions (max 401k contrib, mortgage) making the AGI 170k. Subtract fed pov level of 11k, and you are at ~160k. 10% of this is 16k per year or $1300 a month. This is substantially cheaper than 10 year repayment at $5200 considering the tax hit at the end will be about $150k, adjusted for inflation it will actually be about $75k. PAYE is a good deal on its own for lower income docs. Add PSLF to it, and it is easily the best current choice for non-procedural specialties to pay off loan debt.

xenotype said:

IBR has been changed and PAYE is now available as well. The AAMC calculator you used is not updated to reflect this. The new terms are 10% AGI and 20 years, PAYE allows you to subtract fed poverty level from AGI and also does not allow interest to capitalize. Under PAYE, the average general IM physician comes out much better than the standard 10 year payment term. Assuming 200k as we have been for income, one should be able to take atleast 30k off in tax deductions (max 401k contrib, mortgage) making the AGI 170k. Subtract fed pov level of 11k, and you are at ~160k. 10% of this is 16k per year or $1300 a month. This is substantially cheaper than 10 year repayment at $5200 considering the tax hit at the end will be about $150k, adjusted for inflation it will actually be about $75k. PAYE is a good deal on its own for lower income docs. Add PSLF to it, and it is easily the best current choice for non-procedural specialties to pay off loan debt.

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It's one thing to say that these programs will be around and another thing entirely to say that "not allowing interest to capitalize" and "deducting the fed poverty level" etc. Those are NOT written into anything that is lasting. Finance is all in the details. Someone please show a legal document that states that these factors you are considering into a 25 year plan will be around for 25 years. In the real world, when you enter into a deal that will cost you a half million dollars, you usually get a contract in writing that shows that the DETAILS of the deal will be around, 100% guarantee, or you can take someone to court. I know for a fact that you guys can't produce such a document because the gov't is much smarter than you guys think.

Geez guys, even go to these student loan websites. They are built to SELL you things. You think they invest that much time and money into a site if it wasn't money maker?
http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator "let's show them how low their payment can go!" These guys probably ran a credit card company in another life.

lol, I wish I could make money like the gov't does. They just clean the streets with you guys. I will not laugh but feel sorry for those of you duped in 25 years... "Headline: Medicare is insolvent! **BUT** gov't still hands out 500k in free money to doctors" NOT HAPPENING guys. Use your head.

I'm done with this discussion. Good luck guys. You can't say you weren't warned now.

While OneMoreRound is obviously more financially savvy than most of us, I feel the need to call out this one thought.

OneMoreRound said:

I've also heard if you miss ONE payment, the whole deal is shot. If you know anything about financial companies and people losing a payment or something not posting or some electronic error that didn't transfer properly, etc. then you would realize you are in a very precarious situation..

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The way the loan forgiveness / reimbursement systems are set up, there is absolutely no requirement that the qualifying payments need to be consecutive. For instance, people like to say that the PSLF program forgives the balance of the loan after ten years. The fine print says that you qualify for the forgiveness after a total of 120 months of qualifying payments (a qualifying payment for PSLF being the minimum of the 10 year standard plan or IBR / PYE, while employed at a public or non-profit institution).

While I have my own doubts about the existence of the 10- and 25- (now 20)-year loan forgiveness programs being around by the time we are able to collect on them, I would not ever fear that missing payment #118 would somehow reset the payment clock to zero.

For those who don't qualify for PAYE and are attempting PSLF, are you going to pay 15%/mo just in case PSLF goes bye-bye and you need to flip over to IBR?

kindasorta said:

For those who don't qualify for PAYE and are attempting PSLF, are you going to pay 15%/mo just in case PSLF goes bye-bye and you need to flip over to IBR?

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Everyone will qualify for PAYE. It is based on 10 year standard payments to a percentage of adjusted gross income.

IBR is written into the MPN. It is a legal contract, and cannot be simply taken away on a whim. PSLF can however be taken away at any time. Since PAYE/PSLF count years in residency and fellowship, it is an especially good deal for long residencies or subspecialty fellowships. IBR payments count towards PSLF requirements, so it isn't two separate programs. OneMoreRound is dead wrong on this, the MPN you digitally sign is a binding contract, and it definitely includes specific IBR terms. This is why its called a promissory note.

PSLF is the only thing that really counts as free money as the gap between standard 10 year payments and PAYE is not huge.

xenotype said:

Everyone will qualify for PAYE. It is based on 10 year standard payments to a percentage of adjusted gross income.

IBR is written into the MPN. It is a legal contract, and cannot be simply taken away on a whim. PSLF can however be taken away at any time. Since PAYE/PSLF count years in residency and fellowship, it is an especially good deal for long residencies or subspecialty fellowships. IBR payments count towards PSLF requirements, so it isn't two separate programs. OneMoreRound is dead wrong on this, the MPN you digitally sign is a binding contract, and it definitely includes specific IBR terms. This is why its called a promissory note.

PSLF is the only thing that really counts as free money as the gap between standard 10 year payments and PAYE is not huge.

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I'm not talking about IBR going away. But as it stands, there is a 5% discrepancy between IBR and PSLF (15% vs 10%).

My reading of PAYE is that only new borrowers after 10/1/2007 will qualify. In other words, those of us with student loans that pre-date 10/1/07 will be SOL. Or am I misinterpreting that?

I got this from some "boston student loan lawyer site"...




To me the PAYE is interesting, but getting whammed with a fat tax on the amount forgiven defeats the purpose of it. If you have $300,000 forgiven and have to pay 50% federal and state tax on that, then aren't you back to square one?


On an interesting note, there is a Wisconsin Congressman who introduced a bill. He caps your overall payment at 150% of student loan balance. If you graduate with $200,000 in loans, then you will pay no more than $300,000 in total payments (200K principle + 100K interest). His main point is that the interest on the loans can get out of control. You can read about it here.

Finally, why bother about working hard and paying back loans at all? You can just do what these college graduates do instead of repaying.

masterchef said:

I got this from some "boston student loan lawyer site"...




To me the PAYE is interesting, but getting whammed with a fat tax on the amount forgiven defeats the purpose of it. If you have $300,000 forgiven and have to pay 50% federal and state tax on that, then aren't you back to square one?


On an interesting note, there is a Wisconsin Congressman who introduced a bill. He caps your overall payment at 150% of student loan balance. If you graduate with $200,000 in loans, then you will pay no more than $300,000 in total payments (200K principle + 100K interest). His main point is that the interest on the loans can get out of control. You can read about it here.

Finally, why bother about working hard and paying back loans at all? You can just do what these college graduates do instead of repaying.

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Well technically you wouldn't be at square one, you'd advance half of the squares between where you are and the finish line. And then if the tax burden is truly unpayable, there are programs to discharge tax debt (with bankruptcy as an extreme example), which is more than you can say for non-dischargable student loan debt.

Also, that video was funny. I live a block off of Bourbon Street and know about 1/3 of those interviewed personally (hi Kate!). The bicycle riders and tarot readers aren't making squat, but the bartenders are making $80,000 a year which is more than I ever made in my previous career. A lot of it is in cash, too.

kindasorta said:

I'm not talking about IBR going away. But as it stands, there is a 5% discrepancy between IBR and PSLF (15% vs 10%).

My reading of PAYE is that only new borrowers after 10/1/2007 will qualify. In other words, those of us with student loans that pre-date 10/1/07 will be SOL. Or am I misinterpreting that?

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I did some research. Here's how it is:

-You don't qualify for PAYE if you ever took out a student loan prior to 10/1/07.

-There is no such thing as a dedicated 10% for PSLF. You just use one of the standard repayment plans (whether it be the standard 10 yr repayment plan, PAYE, IBR, etc.). Then after 120 payments you apply for PSLF loan forgiveness.

In other words, you just do IBR, then after 10 yrs you apply for PSLF. If it doesn't exist or you get denied, you just keep making your 15% payments for another 15 years (and morph into a miserable SOB)

kindasorta said:

I did some research. Here's how it is:

-You don't qualify for PAYE if you ever took out a student loan prior to 10/1/07.

-There is no such thing as a dedicated 10% for PSLF. You just use one of the standard repayment plans (whether it be the standard 10 yr repayment plan, PAYE, IBR, etc.). Then after 120 payments you apply for PSLF loan forgiveness.

In other words, you just do IBR, then after 10 yrs you apply for PSLF. If it doesn't exist or you get denied, you just keep making your 15% payments for another 15 years (and morph into a miserable SOB)

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I don't have time to convince people what I'm saying is true. And I also don't really care if you believe me... honestly was trying to help you guys not carry a few extra hundred K by believing in the tooth fairy. Notice people keep saying, "No - it's written into the note, it's written into the note"... yet no one will post the actual language (THE DETAILS) - no one knows what forgiveness means or how much of that forgiveness is taxed (still a great deal if you pay 40% tax on that free money? And move ALL your other income into a higher taxable bracket, making you pay more like 45+% on that money). Is it only private loans, public loans, etc? Has one person ever received it (No). Does the government WANT to pay physicians more money? Basically, I'm trying to inform you guys there are TONS of contigency factors you're ignoring because you read an obviously salesy website designed exactly like their selling you a credit card or car loan - seriously guys - did you see the follow us on facebook or twitter?! WTF... when and why would I follow my student loan distributor on FB or Twitter? You think they aren't selling you something? lol.

Anywho... Good luck. Don't be stupid.

edit: I think the gov't WILL want to encourage primary care, so I think these programs could exist for those groups. But I think a lot of you SDN'ers aren't the "family med for life!" group and are more likely trying to get into a different field that specializes. And guess what, Gov't won't be paying your loans. Welcome to reality.

OneMoreRound said:

I don't have time to convince people what I'm saying is true. And I also don't really care if you believe me... honestly was trying to help you guys not carry a few extra hundred K by believing in the tooth fairy. Notice people keep saying, "No - it's written into the note, it's written into the note"... yet no one will post the actual language (THE DETAILS) - no one knows what forgiveness means or how much of that forgiveness is taxed (still a great deal if you pay 40% tax on that free money? And move ALL your other income into a higher taxable bracket, making you pay more like 45+% on that money). Is it only private loans, public loans, etc? Has one person ever received it (No). Does the government WANT to pay physicians more money? Basically, I'm trying to inform you guys there are TONS of contigency factors you're ignoring because you read an obviously salesy website designed exactly like their selling you a credit card or car loan - seriously guys - did you see the follow us on facebook or twitter?! WTF... when and why would I follow my student loan distributor on FB or Twitter? You think they aren't selling you something? lol.

Anywho... Good luck. Don't be stupid.

edit: I think the gov't WILL want to encourage primary care, so I think these programs could exist for those groups. But I think a lot of you SDN'ers aren't the "family med for life!" group and are more likely trying to get into a different field that specializes. And guess what, Gov't won't be paying your loans. Welcome to reality.

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What you do is you consolidate all eligible loans (which for a standard med student would be ALL your loans) into a Direct Consolidation Loan. Written into the terms of that loan (the Promissory Note) are various repayment guarantees, of which IBR is one option.

So you now have one loan for all your debt and they have to honor IBR and it can't be ganked in the future.

PSLF loan forgiveness is not considered taxable income by the IRS, you don't have to pay taxes on the amount forgiven.

IBR forgiveness is considered taxable income, and you do have to pay taxes on the amount forgiven.

I'm not sure what you're saying, but if you're saying that it's a risk to continue doing IBR for 10 years and applying for PLSF only to be denied because in the long-term you may end up paying a lot more in interest and taxes in the end than you would if you just hopped onto a 10yr repayment plan once graduating residency, I'd have to disagree.

I say the accumulation in interest is negligible when you consider the benefit of a tax-free dissolution of debt after 10 years should you get the PSLF. If they deny you the PSLF, or if it no longer exists, then at that point you can switch over to they 10 yr full payment plan. Or just keep doing IBR for another 15 years - whichever is more financially intelligent for you at that point.

My plan now is to do IBR at a residency which qualifies for PSLF, then maybe fellowship, then get a job for 5 years at a qualifying institution. The only risk I see myself facing is being stuck at a qualifying job for 5 years and getting denied for PSLF, rather than finding the job I most prefer to have for those 5 years. But with >350k in loans, it's a risk I have to take.

kindasorta said:

What you do is you consolidate all eligible loans (which for a standard med student would be ALL your loans) into a Direct Consolidation Loan. Written into the terms of that loan (the Promissory Note) are various repayment guarantees, of which IBR is one option.

So you now have one loan for all your debt and they have to honor IBR and it can't be ganked in the future.

PSLF loan forgiveness is not considered taxable income by the IRS, you don't have to pay taxes on the amount forgiven.

IBR forgiveness is considered taxable income, and you do have to pay taxes on the amount forgiven.

I'm not sure what you're saying, but if you're saying that it's a risk to continue doing IBR for 10 years and applying for PLSF only to be denied because in the long-term you may end up paying a lot more in interest and taxes in the end than you would if you just hopped onto a 10yr repayment plan once graduating residency, I'd have to disagree.

I say the accumulation in interest is negligible when you consider the benefit of a tax-free dissolution of debt after 10 years should you get the PSLF. If they deny you the PSLF, or if it no longer exists, then at that point you can switch over to they 10 yr full payment plan. Or just keep doing IBR for another 15 years - whichever is more financially intelligent for you at that point.

My plan now is to do IBR at a residency which qualifies for PSLF, then maybe fellowship, then get a job for 5 years at a qualifying institution. The only risk I see myself facing is being stuck at a qualifying job for 5 years and getting denied for PSLF, rather than finding the job I most prefer to have for those 5 years. But with >350k in loans, it's a risk I have to take.

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Good links.

My plan is to pay off my debt in 2 years and pay less than ~15k in interest. I have no horse in this race. Hope it works out for you. You're 100% correct and everything I said was wrong, they will write you a 300k tax free check - pay off as little as you can. Good luck.

OneMoreRound said:

Good links.

My plan is to pay off my debt in 2 years and pay less than ~15k in interest. I have no horse in this race. Hope it works out for you. You're 100% correct and everything I said was wrong, they will write you a 300k tax free check - pay off as little as you can. Good luck.

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Now who is being unrealistic? You honestly believe Cardiologists will still get paid the equivalent of $500k in ten years? Their own forum is full of doom and gloom about impending medicare cuts. Pick any other high paying specialty, and odds are it won't pay as well ten years from now. I doubt you are going to waltz into a very high paying private practice job in a procedural specialty and pay off $400k of loans in two years. Maybe 5% will, but everyone else will need PSLF/PAYE for a reasonable answer to loans.

xenotype said:

Now who is being unrealistic? You honestly believe Cardiologists will still get paid the equivalent of $500k in ten years? Their own forum is full of doom and gloom about impending medicare cuts. Pick any other high paying specialty, and odds are it won't pay as well ten years from now. I doubt you are going to waltz into a very high paying private practice job in a procedural specialty and pay off $400k of loans in two years. Maybe 5% will, but everyone else will need PSLF/PAYE for a reasonable answer to loans.

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To be fair, no one really knows where physicians salaries are going.

Textbookversion said:

This thread has a lot of bad math in it, but I'd like to correct a few things.

It's 10% and 20 years, or 10 years with PSLF. PSLF has no balloon tax payment. Time in residency and fellowship count. The amount you pay is Gross Income - ~20k (depends on federal poverty level) *.1, so for a resident the amount is very low.

The amount you pay is independent of the value of your loans.

The point of my initial post is that a law can't change IBR because it is written into the loan contract, ie the feds have a contractual obligation and they literally can't change the terms to hurt you more.

The person figuring you'd spend 1.5 million on paying off your loans is wackadoodle.

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You have more faith in the government than I.

Some people have commented that you will have to pay a tax on the amount forgiven by the government after 20 years of making payments through the PAYE program or 25 years on the IBR program. Well, according to the IRS, there is a provision in which cancelled student loan debt (which I believe includes PAYE and IBR) is not included in your gross income and thus is not taxed. Pretty encouraging, although I guess the tax code could be rewritten 20 years from now.