Loan Payment Deferral in Residency?
Started by MJB
Latest news
May 20, 2008
During the April 2008 meeting of the Department of Educations (DOE) Student Loan Committee, it was reiterated that the 20/220 pathway was removed from the draft regulations for cost reasons, indicating that the 20/220 pathway is estimated to cost $1 billion over 10 years. The DOE will publish its proposed rule for implementing the CCRAA in the next few months, during which the AMA and other stakeholder groups will be able to submit comments in support of maintaining the pathway. As of right now, graduating medical students and eligible residents can still apply for the 20/220 pathway and obtain a year-long deferment if they do so before July 31, 2009.
The AMA continues to urge Congress to reinstate the 20/220 pathway or provide an equivalent funding mechanism for loan deferment in the final HEA reauthorization conference report. H.R. 4137 and S. 1642, the respective HEA reauthorization bills in the House and Senate, will require the House and Senate to resolve differences between the bills before final passage. On May 20, the Senate passed S. 3035, which extends the programs under the HEA through June 30, 2008.
So if Im reading it correctly if you time it write you can get deferrment through 7/31/2010 if you time it perfectly.
May 20, 2008
During the April 2008 meeting of the Department of Educations (DOE) Student Loan Committee, it was reiterated that the 20/220 pathway was removed from the draft regulations for cost reasons, indicating that the 20/220 pathway is estimated to cost $1 billion over 10 years. The DOE will publish its proposed rule for implementing the CCRAA in the next few months, during which the AMA and other stakeholder groups will be able to submit comments in support of maintaining the pathway. As of right now, graduating medical students and eligible residents can still apply for the 20/220 pathway and obtain a year-long deferment if they do so before July 31, 2009.
The AMA continues to urge Congress to reinstate the 20/220 pathway or provide an equivalent funding mechanism for loan deferment in the final HEA reauthorization conference report. H.R. 4137 and S. 1642, the respective HEA reauthorization bills in the House and Senate, will require the House and Senate to resolve differences between the bills before final passage. On May 20, the Senate passed S. 3035, which extends the programs under the HEA through June 30, 2008.
So if Im reading it correctly if you time it write you can get deferrment through 7/31/2010 if you time it perfectly.
I'm in the Class of 2011, so I'm wondering what is going to happen. Not only will it be a "hardship"...it will be flat IMPOSSIBLE to start re-payment of loans in residency aside from maybe the interest payments.
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There are a bunch of threads about this. Basically, if hardship deferral goes away, you'll have access to income-based repayment, and your payments during residency will be capped at 15% of your income above 150% of the federal poverty line. It's about $350/month for most residents. Not impossible.
It'll be next to impossible. If you're earning ~$2,333 per month (after-tax?) and $350 is going toward servicing loans, several hundred more will go to housing and utilities, food, transportation, insurance, etc. you'll essentially be living paycheck-to-paycheck if you're lucky. One unexpected bill (illness, car repairs, professional costs like Step 3) and you'll be overdrawn.
Well, the feds think we can do it. I didn't write the legislation!
But I think you'll probably have more like $2700-2800/month to work with as a single resident making $45K, more if you're married/have kids.
I was making $45,500/yr (similar to an avg resident's salary) working in a lab right before starting medical school (2007) - my take home pay was about $2700/month, and this was in California (fairly high taxes) with maximum deductions. I was also paying $400 a month towards credit cards, and $250 a month towards my car - I won't have either of those when in residency, so I don't think $300-$400 in loan payments will be too bad.
I certainly lived paycheck to paycheck, and lived in a small studio (in LA, so fairly high rent), but I made it okay - and this was without getting any money from my parents or other family members. I actually was much less stressed about my finances then than I am now while in school, because my paychecks were directly deposited into my account every two weeks, without fail, and always at a predetermined amount. Compare this to dealing with financial aid - I never really know how much I am going to get, and usually don't get it until after school has started, so twice a year I am scrambling to make ends meet for a few weeks here and there - and working was actually much less financially stressful.
I guess the point is that you can't expect to do much more than just get by during residency - it sucks, residents aren't paid enough per hour etc. etc. - but you should be able to make it. You can't buy a new car, or live in a really nice apartment, but from my experience, a single person without other debt (CC or car payments), should be able to make it on $2000/mo (that was my income after CC's and my car payment) anywhere other than SF and NYC. In fact, you should have more money on a monthly basis than you do now in school ($2700-$400 in loan payments = $2300/mo - I don't know about you, but I am not getting that much right now for living expenses). If you are really frugal, you can probably set aside a few hundred a month for savings - or you can choose to live a little more comfortably, eat out every now and then, etc.
I don't know what year you are in school, but maybe you can try setting aside a little bit of your loan money right now on a monthly basis, so that you have a month's worth of expenses saved up for a rainy day? I learned my lesson last year with the unreliability of financial aid funds, and so am making a concerted effort to do that this year. Good luck.
PHP:
$ 43,000.00
27%
tax rate
monthly net $2,615.83
Rent
900
Utilities
200
Cellphone
75
Food
200
Health Insurance/Vision/Dental
75
Life Insurance
10
403b
100
car
350
car insurance
50
Total expenses $1,960.00
student loans
$537.50 assumed 15% of salary, divided by 12 for monthly payments
Total leftover $118.33Interesting that people are ok with this analysis because they've "lived" at that level before. It's not the same. You just spent 8 years of your life studying for a doctoral degree ... now you're having a hardship of trying to figure out how to survive while working 80+ hr work weeks and make YOUR ends meet.
The above analysis didn't include credit cards and modest living in a small urban area. Generally speaking, you would NOT be able to afford 15% student loans unless you were in the midwest in a cheap city.
I am a little insulted that people think because they did it before they could do it again. Many have had that mindset until you sit down and look at the actual Cost of Living these days. Many students have no idea how much the price of living has gone up and especially if they move to an area that they are NOT familiar with for residency. Prices overall are 6.8% higher from last year. Prices aren't expected to fall and there have been reports that prices of more consumer products mainly food stuffs will not recede due to demand (hence the rice crisis we had earlier in the year, as well as speculation that beef prices will soar due to grain price increases this year ... beef prices are 12-18 months behind the rest of price increases - per reports on NPR).
BLS said:
So this is PART of the reason why I've been trying to push this issue on SDN. Many people do NOT realize how hard it is to start repayment in residency. You need reliable transportation, good health and nutrition to keep up with items, usually internet access to keep current on readings when you are at home, etc all which will cost money. Money which when it comes to that loan payment will mean quite a bit if you aren't living off mommy and daddy (which many students are NOT!).
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finaid.org - calculator
Loan Calculator
Loan Balance: $130,000.00
Adjusted Loan Balance: $131,313.13
Loan Interest Rate: 6.80%
Loan Fees: 1.00%
Loan Term: 20 years
Minimum Payment: $50.00
Monthly Loan Payment: $1,002.37
Number of Payments: 240
Cumulative Payments: $240,566.28
Total Interest Paid: $110,566.28
Note: The monthly loan payment was calculated at 239 payments of $1,002.37 plus a final payment of $999.85.
The loan balance was adjusted to yield $130,000.00 after deducting the 1.00% loan fees.
It is estimated that you will need an annual salary of at least $120,284.40 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $80,189.60, but you may experience some financial difficulty.
The following table lists the minimum income necessary to repay the debt without encountering a partial economic hardship. Partial economic hardship is defined as having annual education loan payments in excess of 15 percent of discretionary income, where discretionary income is the amount by which Adjusted Gross Income (AGI) exceeds 150 percent of the poverty line. This figure is shown in the Minimum AGI (IBR) column. The Minimum AGI (ICR) column uses an alternate definition of economic hardship, based on 20 percent of discretionary income which is defined as the excess of AGI over 100 percent of the poverty line.
Household SizeMinimum AGI (IBR)Minimum AGI (ICR)
1$95,790.00$70,542.00
2$101,190.00$74,142.00
3$106,590.00$77,742.00
4$111,990.00$81,342.00
5$117,390.00$84,942.00
6$122,790.00$88,542.00
Using a loan term of 20 years instead of standard 10-year repayment reduces the monthly loan payment by $508.79 (33.7%), but increases the total interest paid by $59,227.58 (115.4%).
With a loan term of 20 years, you will still be repaying your debt when your children enroll in college.
Loan Calculator
Loan Balance: $130,000.00
Adjusted Loan Balance: $131,313.13
Loan Interest Rate: 6.80%
Loan Fees: 1.00%
Loan Term: 20 years
Minimum Payment: $50.00
Monthly Loan Payment: $1,002.37
Number of Payments: 240
Cumulative Payments: $240,566.28
Total Interest Paid: $110,566.28
Note: The monthly loan payment was calculated at 239 payments of $1,002.37 plus a final payment of $999.85.
The loan balance was adjusted to yield $130,000.00 after deducting the 1.00% loan fees.
It is estimated that you will need an annual salary of at least $120,284.40 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $80,189.60, but you may experience some financial difficulty.
The following table lists the minimum income necessary to repay the debt without encountering a partial economic hardship. Partial economic hardship is defined as having annual education loan payments in excess of 15 percent of discretionary income, where discretionary income is the amount by which Adjusted Gross Income (AGI) exceeds 150 percent of the poverty line. This figure is shown in the Minimum AGI (IBR) column. The Minimum AGI (ICR) column uses an alternate definition of economic hardship, based on 20 percent of discretionary income which is defined as the excess of AGI over 100 percent of the poverty line.
Household SizeMinimum AGI (IBR)Minimum AGI (ICR)
1$95,790.00$70,542.00
2$101,190.00$74,142.00
3$106,590.00$77,742.00
4$111,990.00$81,342.00
5$117,390.00$84,942.00
6$122,790.00$88,542.00
Using a loan term of 20 years instead of standard 10-year repayment reduces the monthly loan payment by $508.79 (33.7%), but increases the total interest paid by $59,227.58 (115.4%).
With a loan term of 20 years, you will still be repaying your debt when your children enroll in college.
Article - AMA June 2008
http://www.ama-assn.org/amednews/2008/06/16/prsb0616.htm
You have ability to request deferment until June 30, 2009. July 1, 2009 income based payment will start. Terms of that are:
Salary - poverty level amount = salary used for calculation
Salary used for calculation x 15% (or .15) / (divided by) 12 = monthly payment
So example:
$45,000 - current poverty level amount for single ($15315) = 28,695
$28,695 x 15% = $4452.75 expected to pay annually - no matter WHAT amount your loans are
$4452.75/12 = $371 per month payment Also, please note, this goes for federal loans only. Many lenders extended grace period of deferment to residents for private loans for 3 years, this new legislation does not affect private lenders but lenders may require a minimum payment now. So to say that students will only pay $371/mn is not completely true.
Students still have 3 years left of forebearance, but I know many people used that for fellowships after residencies when their 3 years of deferment were completed.
I'd also look into how people are saying that the public service forgiveness (http://www.finaid.org/loans/publicservice.phtml) after 10 years.
I also wonder if there are stats about the actual amount of student loans for health professional students out there (federal) if that would be used from leverage. Its a sad state our education system is in with rising costs for education.
http://www.ama-assn.org/amednews/2008/06/16/prsb0616.htm
You have ability to request deferment until June 30, 2009. July 1, 2009 income based payment will start. Terms of that are:
Salary - poverty level amount = salary used for calculation
Salary used for calculation x 15% (or .15) / (divided by) 12 = monthly payment
So example:
$45,000 - current poverty level amount for single ($15315) = 28,695
$28,695 x 15% = $4452.75 expected to pay annually - no matter WHAT amount your loans are
$4452.75/12 = $371 per month payment Also, please note, this goes for federal loans only. Many lenders extended grace period of deferment to residents for private loans for 3 years, this new legislation does not affect private lenders but lenders may require a minimum payment now. So to say that students will only pay $371/mn is not completely true.
Students still have 3 years left of forebearance, but I know many people used that for fellowships after residencies when their 3 years of deferment were completed.
I'd also look into how people are saying that the public service forgiveness (http://www.finaid.org/loans/publicservice.phtml) after 10 years.
I also wonder if there are stats about the actual amount of student loans for health professional students out there (federal) if that would be used from leverage. Its a sad state our education system is in with rising costs for education.
Last edited:
This is all so confusing for me...so please bear with me. So my wife will graduate in May of 2009. She should qualify for the loan deferment if she applies before June 30, 2009? We are both in school now but with both of our incomes combined it should be around $100K a year starting in July of '09. Does this affect if we qualify for the deferral? (she'll be making standard $40K+). So is this deferral a complete deferral for 3 years with no interest accrual? Is this for all of the stafford loan amounts?
Thanks so much. And if you have any links to this process explained in Lehmans terms, that would be excellent too!
Thanks so much. And if you have any links to this process explained in Lehmans terms, that would be excellent too!
If she applies as soon as she's in-grace period (day after she graduates) she will qualify as far as the current guidelines state.
Usually they will do combined income including a spouse, but my husband was only asked about HIS income, so I would suggest she not mention spousal income and try to stick to her own income only. They will take her total debt amount and calculate a ratio with her future income. Another route some people take is using last year's tax return to prove income. Rarely do I hear anyone taking this option by I believe you can read the guidelines on the ed.gov website somewhere. I think you need proof of residency as well, he had to send proof of his income/residency - i believe used his contract (been awhile since I did this!!!.) You would not qualify for deferment with joint income of $100K.
Deferment is a yearly process, so this will only help her for one year, then she will begin making monthly payments starting in her 2nd year. The deferment means no payments for subsidized and unsubsidized loans, but unsub loans will still accrue interest. Also, it will hold off capitalization of your loan until after deferment expires.
Thanks so much for the quick and extremely helpful reply! That makes a lot of sense. Even one year deferment will help us out a lot to establish ourselves and make sure we have a few extra bucks in the bank. Plus, if she's applying right after graduating I probably won't have a job by then anyways so hopefully she'll have no problem qualifying for the 1st year.
Hey mshheaddoc-
I completely agree that entering repayment will NOT be easy. I am ALL FOR fighting these changes, and fighting to increase resident salaries. I am not one of those people who thinks that med students/residents should just lay down and take whatever comes their way because we're all just here to "help people", and that any thought to one's own/family's well being means that one is horribly selfish and should get out of the medical field. Not at all.
The goal of my first post was just to reassure UserName that it could be done. NOT that it will be easy, NOT that it is okay, but that it can be done - just didn't want him/her to freak out too much - I myself was freaking out about it this past summer until I found out the details.
As you pointed out in one of your later posts, the repayments are capped at 15% of your income that exceeds 150% of the federal poverty level (currently $10,400 for a single person), which brings the monthly payments closer to $350/mo.
I think that my experience living on $2700/mo just a year ago IS valid. I don't really know why that insults you. I am somewhat of a non-trad, having worked for 3 years between college and starting med school a year ago. I never received any back up from anyone (parents etc.) during that time. So I feel like I have some sense of how things will be in residency. In fact, my budget was much like the one you presented (just a little less on utilities & car, and with health/dental ins. covered by my employer, but with CC payments of $300-$400/mo), and I made it. Definitely paycheck to paycheck, but doable. Granted, I think this transition will be a big shock for the traditional premeds who went straight from college to med school, and never supported themselves with a full time job - but everyone has to go through that, required repayments or no.
What I think would be great is if financial aid offices (and maybe some already do this, though mine certainly doesn't) would spend some time with each student at the beginning of their first year, and actually project what their total debt will be, and how those payments will work out both in residency and later, based on the individual student's financial aid package. Because each student's situation is different - as you mentioned, the income based loan repayment cap only covers federal loans, so students with private loans will have a whole 'nother challenge to face. It would be nice to get some financial advising early one from someone who knows what they are talking about.
To be honest, I feel more betrayed and tricked by my own fin aid office than by these changes in the law - for example, the only budget they ever showed was for the first year. They never mentioned that this was only for 9 months, and therefore that your debt would be much more than this budget x 4 (given that years 2 & 3 are 12 months). I also received a scholarship the first year and then had it pulled this year because they made a major change in how they evaluated financial need. So, my total debt is going to be $50,000 more than what I projected when I started.
Anyway, I think it's great that you are pushing this issue on SDN and trying to get people to fight these changes. Best of luck.
I completely agree that entering repayment will NOT be easy. I am ALL FOR fighting these changes, and fighting to increase resident salaries. I am not one of those people who thinks that med students/residents should just lay down and take whatever comes their way because we're all just here to "help people", and that any thought to one's own/family's well being means that one is horribly selfish and should get out of the medical field. Not at all.
The goal of my first post was just to reassure UserName that it could be done. NOT that it will be easy, NOT that it is okay, but that it can be done - just didn't want him/her to freak out too much - I myself was freaking out about it this past summer until I found out the details.
As you pointed out in one of your later posts, the repayments are capped at 15% of your income that exceeds 150% of the federal poverty level (currently $10,400 for a single person), which brings the monthly payments closer to $350/mo.
I think that my experience living on $2700/mo just a year ago IS valid. I don't really know why that insults you. I am somewhat of a non-trad, having worked for 3 years between college and starting med school a year ago. I never received any back up from anyone (parents etc.) during that time. So I feel like I have some sense of how things will be in residency. In fact, my budget was much like the one you presented (just a little less on utilities & car, and with health/dental ins. covered by my employer, but with CC payments of $300-$400/mo), and I made it. Definitely paycheck to paycheck, but doable. Granted, I think this transition will be a big shock for the traditional premeds who went straight from college to med school, and never supported themselves with a full time job - but everyone has to go through that, required repayments or no.
What I think would be great is if financial aid offices (and maybe some already do this, though mine certainly doesn't) would spend some time with each student at the beginning of their first year, and actually project what their total debt will be, and how those payments will work out both in residency and later, based on the individual student's financial aid package. Because each student's situation is different - as you mentioned, the income based loan repayment cap only covers federal loans, so students with private loans will have a whole 'nother challenge to face. It would be nice to get some financial advising early one from someone who knows what they are talking about.
To be honest, I feel more betrayed and tricked by my own fin aid office than by these changes in the law - for example, the only budget they ever showed was for the first year. They never mentioned that this was only for 9 months, and therefore that your debt would be much more than this budget x 4 (given that years 2 & 3 are 12 months). I also received a scholarship the first year and then had it pulled this year because they made a major change in how they evaluated financial need. So, my total debt is going to be $50,000 more than what I projected when I started.
Anyway, I think it's great that you are pushing this issue on SDN and trying to get people to fight these changes. Best of luck.
So I'm applying for a deferment now while I do a research year and matching this year 🙂luck🙂. Can I reapply for the deferment in July of 09 before the deadline or will the timing be off? My current calculated payment of $388 is interest only according to my lender and can't be lowered any further. I'm afraid I'm too old to start learning how to swing around a pole.
You should be able to since your deferment will probably end in June or so this year, correct? Just apply in May and I think you'd be good, but double check with your lender. Hopefully ou have a lender where the customer service reps know what they are talkinga bout .... some lender reps have NO IDEA about med school loans. *sigh*So I'm applying for a deferment now while I do a research year and matching this year 🙂luck🙂. Can I reapply for the deferment in July of 09 before the deadline or will the timing be off? My current calculated payment of $388 is interest only according to my lender and can't be lowered any further. I'm afraid I'm too old to start learning how to swing around a pole.
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Hahaha, where are you going into residency?
Agree with the comments (and calculuations/statements) of yayadude and babel. Take home pay as a resident should be around $2700-$2800/month. Remember that you do get yearly raises also (though they aren't big they are enough to keep up with inflation, etc. in general). The 300-something per month required loan repayments will suck but should be doable...also remember that you will very likely get a tax refund due to being able to deduct $2500/year of your student loan interest payments on your taxes. If possible, it's better to pay a little on your student loans while you are a resident anyway rather than just deferring it all, so that the loans just don't keep getting bigger and bigger.
I also think nobody has pointed out that there is generally a 6 month grace period after you graduate (for med school and most other student loans) during which you don't have to make payments, so you'll have time to move, get established, etc. before you have to start making payments.
Agree that the elimination of the 20/220 pathway, that allowed students to defer loans the first couple of years of residency, with the gov't paying the interest on the students' subsidized Stafford interest during that entire time, is a blow to medical students, and I have lobbied against getting rid of the old 20/220 pathway (unsuccessfully) as part of the AMA's efforts. I am sure other student and resident organizations (AMSA, etc.) probably also fought this as well, but getting rid of the pathway and adding in the new version of "graduated income/economic hardship" was written in to the Higher Education Reauthorization Act that Congress passed either last year or earlier this year. Although that part sucked, there were some good things in the legislation also. It was just one of those situations where we lost out on our particular issue. We just couldn't convince the legislators why physicians needed a special deal...there are plenty of other students in a lot of debt, so I think the legislators just felt like they would create one income-sensitive repayment plan, and just get rid of our special deal that we had...
I also think nobody has pointed out that there is generally a 6 month grace period after you graduate (for med school and most other student loans) during which you don't have to make payments, so you'll have time to move, get established, etc. before you have to start making payments.
Agree that the elimination of the 20/220 pathway, that allowed students to defer loans the first couple of years of residency, with the gov't paying the interest on the students' subsidized Stafford interest during that entire time, is a blow to medical students, and I have lobbied against getting rid of the old 20/220 pathway (unsuccessfully) as part of the AMA's efforts. I am sure other student and resident organizations (AMSA, etc.) probably also fought this as well, but getting rid of the pathway and adding in the new version of "graduated income/economic hardship" was written in to the Higher Education Reauthorization Act that Congress passed either last year or earlier this year. Although that part sucked, there were some good things in the legislation also. It was just one of those situations where we lost out on our particular issue. We just couldn't convince the legislators why physicians needed a special deal...there are plenty of other students in a lot of debt, so I think the legislators just felt like they would create one income-sensitive repayment plan, and just get rid of our special deal that we had...
California, probably. Why do you ask?
Just to note, the forbearance option will be available but only for 3 years if you can't afford the payments as well as you will have your interest accrue. Please note this is for federal loans only. Private loans will still be depending on the lender terms.
And I still protest that those who think that living off of $2700/mn is an easy feat. Many of my friends tried to stretch their beat-up cars through med school and now they've died and they HAVE to have a car for transportation. Unless you are in a handful of cities in the US (probably 10 or so - exaggerating but public transit sucks here and that has been acknowledged many times) that have decent public transportation or you plan your living arrangements based on public transportation ahead of time (which is hard when moving to a new city if you don't know the lay of the land) you will need a car. Some programs have you do various rotations at outlying hospitals so please note this.
Living in a major city on a residents salary is a hard feat when you break down the actual costs that you are paying out. Please take a look at your costs ahead of time because many residents are ending up in the red.
And I still protest that those who think that living off of $2700/mn is an easy feat. Many of my friends tried to stretch their beat-up cars through med school and now they've died and they HAVE to have a car for transportation. Unless you are in a handful of cities in the US (probably 10 or so - exaggerating but public transit sucks here and that has been acknowledged many times) that have decent public transportation or you plan your living arrangements based on public transportation ahead of time (which is hard when moving to a new city if you don't know the lay of the land) you will need a car. Some programs have you do various rotations at outlying hospitals so please note this.
Living in a major city on a residents salary is a hard feat when you break down the actual costs that you are paying out. Please take a look at your costs ahead of time because many residents are ending up in the red.
