New Legislation and Deferment

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MedMan2005

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It looks like the common view among the medical student community is that medical students/residents will no longer be eligible for economic hardship deferment under the recently passed higher education reconciliation legislation. My interpretation is that eligibility is not changed, but that they are simply creating a new form of repayment plan called the income based repayment plan, which is different from deferment. I’m looking for information about how the legislation is being interpreted.

Thanks in advance for any help.
 
I've got to say I haven't heard anything about getting rid of the hardship deferment -- where have you been hearing this? Just curious because it would be pretty significant to most of us. I think there's always been a form of income-sensitive repayments, so maybe they're just changing that?

Since the hardship deferment is classified with deferments and separated from repayments, I'd be surprised if a change in repayments would affect the deferments.
 
plusminus said:
Actually, Economic Hardship Deferment is a thing of the past as of July, 2008.
Income-Based Repayment will take its place and it will certainly not be as resident friendly.

http://www.nasfaa.org/publications/2007/gdefermentibr091307.html
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The words I'd like to use right now would be censored out. This is a complete load of crap and there better be an amendment for this. Someone best be telling AMA/AOA AMSA/SOMA about this crap being pulled. I can not begin to TELL you how pissed I am to hear this. 😡

I'm supposed to be studying and I logged in just to post this because I TRULY can NOT believe this go through. How low was this on the radar?

WRITE YOUR REPRESENTATIVES!!!!!!
 
mshheaddoc said:
The words I'd like to use right now would be censored out. This is a complete load of crap and there better be an amendment for this. Someone best be telling AMA/AOA AMSA/SOMA about this crap being pulled. I can not begin to TELL you how pissed I am to hear this. 😡

I'm supposed to be studying and I logged in just to post this because I TRULY can NOT believe this go through. How low was this on the radar?

WRITE YOUR REPRESENTATIVES!!!!!!
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Wow, yeah, I can't believe this. It almost feels like it's specifically aimed at residents since they have large debt loads but non-poverty salaries. This is just unbelievable.

And where are our lobbying groups? Shouldn't they be monitoring this and keeping us informed? I should have gotten an email from AMSA already about this.
 
Adding that I like the income-based repayment proposal overall, but it doesn't work well for residents. It would be nice if they could just renew the specific residency deferments.

So is the economic hardship forbearance still there, or is that going away, too?

And darnit, that Dodd proposal that I posted above is dated March 2007 -- I hope it didn't just die. 😡
 
I was hoping that it was just an additional repayment option and was not eliminitating the economic hardship deferment provision that most residents utilize. I am not convinced on the interpretation one way or the other yet, but the article on NASFAA leads me to believe it will be an elimination. Anyone spoken to their lenders, fin aids, or legislative officialsto get definitive clarification? If so please post any responses and from whom the response was given. Thanks
 
The wording lead me to believe that economic deferment is gone.

The final conference agreement includes a change in the criteria to qualify for the economic hardship deferment that eliminates the debt-to-income pathway, which is the most common means by which medical residents obtain eligibility. The mandatory medical residency/internship deferment and forbearance will not be affected.

While the final bill increases the maximum qualifying income for the first pathway, it is unlikely that residents will continue to qualify for the economic hardship deferment. Under the new definition, a borrower's income cannot exceed the greater of either the minimum wage rate or 150 percent of the poverty line applicable to the borrower's family size. For an independent single student the maximum qualifying monthly income will be $1,276.
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The bolded part is the part I do NOT get ... 😕
 
I believe (but don't quote me) that what they are referring to would be a required residency in conjunction with a scholarship (like a Health Corp scholarship etc). I don't think it will be retroactive to all borrowers but follow the precedent that deferments phase in and out. For example "medical residency deferments" would be available to borrowers whose first loan was disbursed before 1993. Your rights go with the loan as of the day the money changed hands so old borrowers could defer for residency but new borrowers did not have the right. Military deferments once phased out came back in a few years ago when all the National Guardsmen serving our country were called out of school, entered repayment 6 months out and were having their credit ruined finally one of Feds said "that doesn't seem right" and they voted to add it back to the list of options.
The reason that med kids lost the deferment provision initially and had to explore eco hardship was based on the GME funding supporting most of the hospitals and their programs, largely tax payer funded. I'm sure it seemed odd to someone that med residents were making more per year than the gas station attendant paying taxes to offset your rate and pay your interest as well paying for GME. It's always about the money (or lack there of).
I'm not sure how this will all play out at the Federal level as it seems like a mixed bag but I am sure AMSA etc... are waging the fight.
The other item to point out would be that if you had loans now with the eco harship right attached, be mindful that if you consolidate after this goes into effect (if it does) your consolidated loan would be considered a new loan with new rights (or lack of) depending on how the legislation is written.
As for the dentist types: if you go onto specialty, you most likely will be able to defer repayment in an in school status because you are highly likely to be enrolled at a dental school working towards earning a certificate. Your deferments really have nothing to do with "residency" at all.
 
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So basically the specific residency deferments are still in place, but they don't do any good for anybody since pretty much all residents out there went to school after 1993. And when economic hardship deferral goes away, we're out of luck.

I guess we all need to be following this one.
 
I think what you are saying is largely correct: there aren't many pre 1993 borrowers in residencies but they had the right when they borrowed the money to defer for residency. For example, you borrowed in 1992 and decide to go to med school in 2001, you would have the right to defer for your medical residency because when you first borrowed, you had that right. It would apply to your new loans because it was a borrower right and not necessarily a loan specific right.
Most current residents apply for eco hardship deferment annually and that was a right they had when they borrowed the money. As far as I can tell, the feds have not removed a deferment option across the board so if eco hardship is eliminated I feel it would be for borrowers after such and such a year and not for everyone all at once.
Your original loan notes would have listed your rights and responsibilites and were basically a contract. If you research deferments in general for federal loans you will see a pattern of "for borrowers before 199_, it's this but borrowers after 199_ it's that" The charts are a bit confusing with all the footnotes at the bottom but it should show you what I'm trying to explain.
The required residency doesn't look to be changing but it wasn't a right most of you had to begin but could have become a right if you enlisted in the Health Corps (maybe military but I'm not sure about that...).
 
I got a few responses, Here is one of them:

AMA MSS said:
I apologize it has taken me so long to respond, although I'd like to now – I will keep it brief.



My understanding is that everyone – organized medicine, basically – was caught off-guard by this. The reason is because the language was inserted in Conference Committee (where the two houses of Congress reconcile bills after they are passed by each house) and was not made known until the Conference Report, as they call it, had to be made public – it appears, for obvious reasons, that this was intentional. That being said, I agree it is VERY disheartening and I want to assure you that your MSS, and your larger AMA, takes this extremely seriously and are working very hard on a response at this very moment. Again, this came as a surprise to us all, and I'm not sure the ramifications of this action are fully understood by all stakeholders, including Congress.
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And the AOA:
Thank you for your email. The AOA has actively advanced legislation aimed at improving both the financing of education and the repayment of loans for the past several years. In fact, we were on of the principle architects behind the expansion of the student loan interest deduction provisions included in the 2001 tax bill which was enacted into law. The AOA has been an active supporter of Sen. Dodd's legislation as well as a similar bill in the House introduced by Reps. Price and Boustany. Additionally, we have worked with Rep. Andrews for the past few years to advance a variety of provisions aimed at reforming the loan repayment process for professional students. In general, we support the deferment of interest on student loans through the initial residency period regardless of specialty. We have not taken a position on deferment during fellowship training. Sen. Dodd's legislation was not included in the Senate version of the Higher Education Reauthorization Act. We are hopeful that the House version of the same legislation will include corrective provisions.



Please feel free to contact Cate Blankenburg at [email protected] for additional information on the AOA's work on student loan and education financing issues.



Shawn





Shawn Martin

Director of Government Relations

American Osteopathic Association
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In reading the nasfaa link above I understand that there will be some type of interest subsidy on the new repayment plan:


Income-Based Repayment
The final bill also creates a new program of income-based repayment that would cap participating borrowers' loan payments at 15 percent of their income that is over 150 percent of the poverty line applicable to the borrower's family size. For example, a medical resident with the average first year stipend ($43,266) would only be required to make monthly payments of $349, as calculated below:
[$43,266 - ($10,210 x 1.5)] x 0.15
12​

The holder of such a loan shall apply the borrower's monthly payment under the income-based repayment program first toward interest due on the loan, next toward any fees due on the loan, and then toward the principal of the loan.
All federal (Direct and FFEL) loans are eligible for income-based repayment, except PLUS loans (for dependent undergraduates) and consolidation loans with such PLUS loans. Grad PLUS loans are eligible. Private loans are not eligible. There is no minimum qualifying debt and no maximum disqualifying income.
Similar to the economic hardship deferment, the federal government will continue to pay interest on the subsidized portion of the loan during the first 3 years of income-based repayment; interest will continue to accrue on the unsubsidized portions. After 3 years, interest will begin to accrue on the subsidized portion of the loan as well.
Once a borrower has made income-based repayments for a period of 25 years, the remainder of the borrower's federal debt is forgiven.
A participant can elect to leave the income-based repayment program at any time. After leaving the program, the borrower's monthly payment can not exceed the monthly repayment schedule the borrower held immediately before entering the income-based repayment program (as calculated for a 10-year repayment period). Interest on the loans is capitalized at the time the participant elects to leave the income-based repayment program, most likely at the end of a physician's residency
 
I guess we'll continue to watch all of this get more horrendous. I'm not sure why the government hasn't just shown up at my home with guns drawn and a demand that I give everything I work for to Sallie Mae. I need to start spending more money on lobbyists so that I can get guaranteed zero risk loan payments back faster too.
 
This is definitely a BIG issue - and one that any student taking on debt post under-grad needs to be aware of - after re-reading the the wording on the College Cost Reduction Act, it is completely evident that most medical students will not long be eligible for EHD for the three years as they would have in the past.

Medical Residency Forbearance will still be available - so no payment will be required during residency. But for the average 4-year borrower who takes out the $8500 Sub Stafford loan, it is going to cost them an additional $7000 of interest, that wouldn't have accrued had they been privvy to EHD.

The AMA-MSS has a TAKE ACTION section on their site that students should consider getting involved in.
http://www.ama-assn.org/ama/pub/category/14.html
 
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I was reading the NASFAA link and it appears that private loans won't be affected (luckily) because this a a majority of my borrowing for UG. Is this correct? And does this sound too good to be true: Once a borrower has made income-based repayments for a period of 25 years, the remainder of the borrower's federal debt is forgiven.

I'm horrible with financial aid. I do what I have to in order to get through the year with the bursar off my ass. What is the biggest effect going to be? Is it no deferment for Stafford loans through residency? How about through medical school? Will I have to start paying UG back under these conditions when I'm a medical student or will I still be able to defer? (I have a mix of stafford and private loans)
 
ahaydt said:
I was reading the NASFAA link and it appears that private loans won't be affected (luckily) because this a a majority of my borrowing for UG. Is this correct? And does this sound too good to be true: Once a borrower has made income-based repayments for a period of 25 years, the remainder of the borrower's federal debt is forgiven.

I'm horrible with financial aid. I do what I have to in order to get through the year with the bursar off my ass. What is the biggest effect going to be? Is it no deferment for Stafford loans through residency? How about through medical school? Will I have to start paying UG back under these conditions when I'm a medical student or will I still be able to defer? (I have a mix of stafford and private loans)
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I don't believe there's any change planned for in-school deferment. Of course, since most of us have an income of $0 while in school, being forced to pay 15% of that wouldn't be too hard. 😀 I believe all the other deferments are also staying like unemployment, having a baby, etc..

Yeah, the loans are supposed to be forgiven after 25 years of 15% payments. I actually like that and think it's a good plan for people who have to take out a lot of loans and don't make much money. I just wish they weren't getting rid of the hardship deferment to make this change.

And you're right, this doesn't affect private loans.
 
Remember this new plan doesn't take effect until July, 2009 - and it does require that you make payments of 15% of your monthly income.
 
So basically, what this is saying is, I should take a few years off and stay home to have a few kids after doing a long residency (say, surgery), and then do fellowship after fellowship - so that will eat up oh, 15 years or so, and then I should take a low-paid position with a govt or charitable institution, with occasional unpaid leave to go work overseas, so that, at the end of all that, I have paid, approx. $200,000 (average salary of $55,000) on my loans instead of the possible $387,000 (with an avg salary of $100,000 over those 25 years) -if you let all that interest build over residency, that doesn't seem like an unreachable debt, if you took out max stafford and some private loans.

Does this also penalize married students, as household income will be higher if the spouse works? (ie, my 15% will be higher b/c of this)

It also seems to penalize people who do residencies in areas w/ higher cost of living, as there isn't a big salary diff to reflect regional cost of living diff.

If I want to do peds or FM right out of school, I pay every dime. If I try to minimize my debt, I pay every dime. But if I have a boatload of debt and don't do anything about it, eventually I don't have to pay.

Isn't the gov't trying to encourage primary care? Fiscal responsibility?

Grrr....
 
This pisses me off to no end, I can barely make ends meet as it is with only 1 income supporting my family, and now they expect this? So what are these ***** going to do when I can't pay? Take my diploma? Remove my means of livelihood? It's not that I'm a lazy prick who is unwilling to take a 2nd job, I'm physically incapable of fitting anymore work into the day. There is only one solution, I'm opening up an online porn site..........

I spent a good chunk of time on the phone today only to realize that the idiots who not only allowed this to happen but made it happen are on a vacation.

Why isn't this thread taking off?
 
Yikes. I wonder if I should e-mail this thread to my whole class. I just noticed the announcement on SDN today.
 
Email your classmates and representatives about this!!!!!!!!!!!!!!!!!!!
 
I work in the student loan industry - so my personal finances aren't being affected - but having talked to so many medical students who go into school knowing that they have deferments options to get them through medical school as well as extended repayment plans to help as well - no one would have imagined that paying back 15% of your income to get your loans paid off would be the final result.

Remember too - that when they determine the amount owed under this repayment plan it doesn't take your debt load into account at all - just how much you make and how big your household is.
 
edubbs5 said:
I work in the student loan industry - so my personal finances aren't being affected - but having talked to so many medical students who go into school knowing that they have deferments options to get them through medical school as well as extended repayment plans to help as well - no one would have imagined that paying back 15% of your income to get your loans paid off would be the final result.

Remember too - that when they determine the amount owed under this repayment plan it doesn't take your debt load into account at all - just how much you make and how big your household is.
Click to expand...

Yeah, it feels like having the rug pulled out from under me. I never expected to have to pay my loans during residency. The thing that's making me mad about this bill is that it seems like it's benefitting all borrowers except residents. Why the hate for us?

Also, as asked about above, I believe that your spousal income is included to get that 15% -- at least that's what I saw when making a quick read of the bill.

Here's the link for a draft of the bill and information regarding who voted for it.

http://www.govtrack.us/congress/bill.xpd?bill=h110-2669
 
Doctor Bagel said:
Here's the link for a draft of the bill and information regarding who voted for it.

http://www.govtrack.us/congress/bill.xpd?bill=h110-2669
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I just got even MORE pissed:

Section 702 -
Prohibits military and civil authorities, federal, state, and territorial, from carrying out death sentences on pregnant women.


Title VIII - Other Matters
Section 801 -
Expresses the sense of the Senate that detainees housed at Guantanamo Bay, Cuba, including senior members of al Qaeda, should not be released into American society or transferred stateside into facilities in American communities and neighborhoods.
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I love our government. This is a collective example of our higher educational act.

I really can't believe that the Sen Dodd's legislation didn't go anywhere as its been referred to the committee. http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.01066:

We need to contact the committee directly.

http://washingtonwatch.com/bills/show/110_SN_1066.html

:laugh: Everyone vote and make it go up.
 
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mshheaddoc said:
I just got even MORE pissed:



I love our government. This is a collective example of our higher educational act.

I really can't believe that the Sen Dodd's legislation didn't go anywhere as its been referred to the committee. http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.01066:

We need to contact the committee directly.

http://washingtonwatch.com/bills/show/110_SN_1066.html

:laugh: Everyone vote and make it go up.
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Spammed my school's message with that, too. I really do think it's important to contact all the medical students and residents you know about this.
 
Ok so most of the specialty organizations have these slick websites that produce form letters to get their point across regarding specific legislation issues. When is the AOA or AAMC or SOMA or AMSA going to help us out with a form letter like this that we can easily click off and send to our representatives.

no one knows about this stuff. maybe someone here who knows enough about this stuff can start up a letter that we can sign off on and send to our classmates to have them email their representatives?
 
mshheaddoc said:
Everyone vote and make it go up.
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I voted for it, and it changed from 44 to 47%! I guess not many people have voted for it. We could easily get it above 50% if SDNers voted for it. I'm not sure how much it would matter, but it couldn't hurt, right?
 
my congressmen voted against it 👍
 
The Medical Education Affordibility Act that you are going to - is actually an old proposed piece of legislation (started in 2005). It is much more important that you work on talking to your classmates and student groups about overturning the most recently approved piece of federal legislations - the CCRAA (College Cost Reduction and Access Act).

Points to be aware of - gvmt is promoting this as a piece to save money without having tax payers having to feel the burden. So where is the money to give more Pell grants coming from? The subsidy they would have paid when you future doctors were applying for and receiving economic hardship deferment.

As I mentioned before - I am not a medical student, instead I work in student loans, but I hope that through my research, I can give you guys good information - since I know your time is limited to fully understand how this will affect you. If you have questions - please don't hesitate to let me know - and I would be happy to look into them further.
 
edubbs5 said:
I work in the student loan industry - so my personal finances aren't being affected - but having talked to so many medical students who go into school knowing that they have deferments options to get them through medical school as well as extended repayment plans to help as well - no one would have imagined that paying back 15% of your income to get your loans paid off would be the final result.

Remember too - that when they determine the amount owed under this repayment plan it doesn't take your debt load into account at all - just how much you make and how big your household is.
Click to expand...

Income-contingent repayment for 25 years has always been an option, hasn't it? Finaid.org has had a resource page for it for some time now (http://www.finaid.org/loans/icr.phtml), which they seem to have tweaked to add the public service debt forgiveness bit now. Has the income-contingent option been expanded in any way?

When I ran the various calculators on finaid.org, it looked like ICR resulted in much higher monthly payments than extended (and even standard) repayment for a family with two professional (50k+) income earners. It seemed difficult to reach 25 years for partial forgiveness, given the formulas.

For example, I just did a quick calculation (http://www.finaid.org/calculators/icr.phtml) assuming a $110k combined household income for a two-person household, and with some assumptions in terms of discount rate, inflation, etc., pursuing ICR resulted in an 8.7 year repayment term (~$1600 monthly payments!) on ~140k in loans.
 
So assuming you make $40k/year as a resident, it seems like they're expecting you to pay $500/month (15% of gross income). 😱 I've made $40k before, and making a $500/month loan payment would have been pretty hard. It would certainly cut into residents' ability to save for retirement (something we all really need to do) or save to buy a house (something I particularly want to do). Having a kid on top of that payment would make life really hard.
 
Doctor Bagel said:
So assuming you make $40k/year as a resident, it seems like they're expecting you to pay $500/month (15% of gross income). 😱 I've made $40k before, and making a $500/month loan payment would have been pretty hard. It would certainly cut into residents' ability to save for retirement (something we all really need to do) or save to buy a house (something I particularly want to do). Having a kid on top of that payment would make life really hard.
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15% gross above 150% of poverty. It's bad, but it isn't THAT bad.
 
What gets me about this is that 15% gross above 150% of the poverty line is going to FEEL like a lot of money on a resident's salary (I agree with Doctor Bagel), but at the same time, it's peanuts compared to what people actually owe. If you owe $200K at an average interest rate of 7.5%, paying $350/m means you're paying about 30% of the interest alone each year. I mean, why bother? Why do this to us? Also, I'm assuming the remainder of the interest continues to accrue (on unsubsidized, GradPlus and subsidized after three years)? So even though you're in repayment and struggling to make payments, your loan balances are actually going up? It just seems mean.
 
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yadayadadude said:
What gets me about this is that 15% gross above 150% of the poverty line is going to FEEL like a lot of money on a resident's salary (I agree with Doctor Bagel), but at the same time, it's peanuts compared to what people actually owe. If you owe $200K at an average interest rate of 7.5%, paying $350/m means you're paying about 30% of the interest alone each year. I mean, why bother? Why do this to us? Also, I'm assuming the remainder of the interest continues to accrue (on unsubsidized, GradPlus and subsidized after three years)? So even though you're in repayment and struggling to make payments, your loan balances are actually going up? It just seems mean.
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I believe that for subsidized loans, the amount that you can't pay because it's beyond that 15% is still treated like a deferment so interest doesn't accrue on those. Interest is still going to accrue on all the unsubsidized and GradPlus loans that we can't pay.

Another thing that makes this bad is that under the current scheme, if we did have a few hundred bucks a month to put toward loans, we could selectively put it towards the worst loans (private, GradPlus and then unsubsidized Staffords in that order). Now we will have to put some of that money toward subsidized loans, which we could have just let sit without accruing interest under the current scheme.
 
I wonder if we will start to see less applicants to med school now.
 
Faebinder said:
I wonder if we will start to see less applicants to med school now.
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Nah, I am convinced there's pretty much no financial burden pre-meds aren't willing to assume.
 
I'm with you guys, this piece of legislation absolutely sucks, and it's going to screw me over in a big way (I've got a wife, two kids, and one on the way). I can't spare 15% of my salary to pay off any portion of my nearly $300k in loans. Sheesh.
 
Just looked at information on the bill....

THANK YOU DEMOCRATS!

Just another example of how the people voting for these things just don't understand what they are doing...

What next? Hillary Care?

We have no choice but forebearance...
 
ItsGavinC said:
I'm with you guys, this piece of legislation absolutely sucks, and it's going to screw me over in a big way (I've got a wife, two kids, and one on the way). I can't spare 15% of my salary to pay off any portion of my nearly $300k in loans. Sheesh.
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Same here, 2 kids and one on the way... I want George Miller (Original sponsor for this bill) to tell my kids that's there's going to be no Christmas this year. And that they better get used to Ramen noodles.
 
Doctor Bagel said:
I don't believe the forbearance has a time limit, and if you check the last paragraph on this page, it sounds like there was official legislation a while ago allowing residents to get a forbearance for the duration of their training.

http://www.medstudent.ucla.edu/offices/fao/residents/residents/econhardship.html
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I misspoke, apparently the loan rep was wrong if those are the true findings. Not sure if that includes fellowship though, hoping it does. 🙁
 
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