Student Loan Repayment Advice for MS4s

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lfesiam

lfesiam

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For those who don't have rich mommy and daddy to pay off their loans, help is here!

- Have $210,000 in loans consolidated with DIRECT LOAN at 5-6% fixed.
- Pay about $400-$500 a month during residency (less if with kids and married)
- Will be forgiven in 10 years (if you work for 501(c)(3) organizations, i.e. can be private attendings in a 501c3 hospitals - most hospitals in the US, residency counts)
- If you don't work for a 501c3 organization, loan will be forgiven in 20 years.
- Monthly repayment is capped at 10% of post taxed monthly income. (if you're out making $320,000, it'll be around $2500/month)
- If you do 4 years of residency, 1 year of fellowship, 5 years working in a 501c3 organization earning $300,000/year, total repayment will be around ~$170,000, ~$40000 less than your original debt.

How?

Read below:

Income-Based Repayment

Income-Based Repayment (IBR) is a new payment option for federal student loans. It can help borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, IBR loan payments will be less than 10 percent of their income - and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.

Who can use IBR? IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents (click here for more about qualifying loans). To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15 percent of whatever you earn above 150% of poverty level to pay off your loans on a standard 10-year payment plan. Use our calculator to see if you're likely to be eligible.

How does IBR make payments more affordable? IBR uses a kind of sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more, your loan payment will be capped at 15 percent of whatever you earn above that amount. Except for the highest earners, that usually works out to less than 10 percent of your total income.

What about interest? In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven.

What are qualifying payments? The Department of Education has indicated that the following types of payments will count towards IBR's 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

* Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
* All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
* Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
* Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.



Public Service Loan Forgiveness

Public Service Loan Forgiveness is a new program for federal student loan borrowers who work in certain kinds of jobs. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. (During those 10 years, the Income-Based Repayment (IBR) plan can help keep your loan payments affordable.)

Who can get Public Service Loan Forgiveness? This program is for people with federal student loans who work in a wide range of "public service" jobs, including jobs in government and nonprofit 501(c)(3) organizations.

What are eligible jobs? In most cases, eligibility is based on whether you work for an eligible employer. Your job is eligible if you:

* are employed by any nonprofit, tax-exempt 501(c)(3) organization;
* are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
* serve in a full-time AmeriCorps or Peace Corps position.

If you don't meet these criteria, the Department of Education's regulations create a two-part test of other circumstances under which you may still be eligible:

(1) your employer is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;"

and,

(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

These definitions of eligible jobs reflect the Department of Education's final regulations for PSLF, as posted in the Federal Register on October 23, 2008.

What kinds of loans does it cover? It covers federal Stafford, Grad PLUS, or consolidation loans as long as they are in the Direct Loan program. Borrowers with loans in the Guaranteed (or FFEL) loan program must switch to the Direct Loan program to get this benefit.

When does the 10-year clock start, and which payments count? Only payments made after October 1, 2007 count towards the 10 years (120 monthly payments, not necessarily consecutive) required for Public Service Loan Forgiveness. Qualifying payments are payments made through the William D. Ford Direct Loan Program in any of the following three repayment plans: the Income Contingent Repayment plan, the Standard (10-year) Repayment plan, and the Income-Based Repayment plan.

To count, these payments must be made while you're working full-time in an eligible job. "Full-time," according to the final regulations issued by the Department of Education, means an annual average of 30 hours per week or the standard for full-time used by the employer, whichever is greater. For people working part-time at two or more qualifying jobs, "full-time" means an annual average of 30 hours across all jobs held. In professions such as teaching, annual contracts that include at least eight months of full-time work will be treated as the equivalent of a full year's employment. If you meet all the criteria, the earliest your remaining debt could be forgiven is October 2017.

What if I've already paid off my loans by then? This loan forgiveness program will only benefit people who still owe money on their federal loans after 10 years of eligible payments and employment. If your income is low relative to your debt, and you qualify for reduced payments under IBR (or Income Contingent Repayment) at any time during those 10 years, you will likely have debt left to forgive. (Learn more about IBR.)

UPDATE:

Obama Proposes IBR Improvements:
Today President Obama announced that he wants to improve IBR to make student loan repayment more affordable for people who are struggling. Obama's proposal, which he will mention in the State of the Union on Wednesday, would cap IBR payments at 10 percent of discretionary income (rather than the current 15 percent) and forgive remaining debts after 20 years (rather than the current 25 years). This would expand the number of people who are eligible for the program, and make it even more helpful for those who already qualify.

MORE INFO: http://www.ibrinfo.org/

Another more risky option for home owners: take out a home equity loan (at a lower interest rate than your student loan) to pay off your student loan.
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Glad you posted this. I was planning on meeting with a financial adviser sometime before graduation because I just wasn't sure the best way to invest my (limited) resources during residency.

Did you guys do this IBR program? What are the downsides? What if you don't work for one of the qualifying organizations after residency and make a big salary (400K plus)? My understanding would be that you are locked in to paying a big fat portion of your salary to student loan payments (currently 15% of your salary)...am I reading this right?

What about investing in a 401K as a resident? I know starting early is important in retirement savings, but I wonder if the tiny amount you could afford to put away as a resident wouldn't be better spent on actually enjoying your limited time off from work?

Thanks guys. Sorry for my ignorance on this topic.
 
okayplayer said:
Did you guys do this IBR program? What are the downsides? What if you don't work for one of the qualifying organizations after residency and make a big salary (400K plus)? My understanding would be that you are locked in to paying a big fat portion of your salary to student loan payments (currently 15% of your salary)...am I reading this right?
Click to expand...

Are you really locked in to IBR after residency? I would think once you start making attending salary, you would no longer qualify for IBR and thus start a standard monthly repayment plan.

Another big benefit of the IBR plan is Interest Payment Benefit:

INTEREST PAYMENT BENEFIT - If your monthly IBR payment does not cover the monthly interest that accrues on the loans, the government will pay your unpaid interest on Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from when you first enter IBR repayment. After three years, and for all the other types of loans, interest that accrues will be capitalized (added to the loan principal on which future interest is calculated) when the borrower no longer is eligible for an IBR repayment amount.)
Source: http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp

Although, this leads me to a couple more questions. Subsidized Stafford Loans only make up $8500*4 = $34000 of my total debt. When making IBR monthly payments, does that money necessarily go towards subsidized vs unsubsidized loans first? In other words, can I choose to make payments towards unsubsidized loan interest, and still have the Stafford Loans 100% subsidized under the Interest Payment Benefit?
 
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okayplayer said:
Glad you posted this. I was planning on meeting with a financial adviser sometime before graduation because I just wasn't sure the best way to invest my (limited) resources during residency.

Did you guys do this IBR program? What are the downsides? What if you don't work for one of the qualifying organizations after residency and make a big salary (400K plus)? My understanding would be that you are locked in to paying a big fat portion of your salary to student loan payments (currently 15% of your salary)...am I reading this right?

What about investing in a 401K as a resident? I know starting early is important in retirement savings, but I wonder if the tiny amount you could afford to put away as a resident wouldn't be better spent on actually enjoying your limited time off from work?

Thanks guys. Sorry for my ignorance on this topic.
Click to expand...

This is what I did so far with my resident salary:

1) 1%-5% return Keep a monthly budget by using www.mint.com - using only cash back reward credit card that will give you 1%-5% of what you spend. Fortunately, I have no credit card debts, always paid on time since college + keep requesting to increase your credit limit! If you have credit card debts, pay those off first.

2) 1.55% return: Save 6 months worth of emergency fund in a online high yield saving account (capital one direct currently offer 1.55% interest with extra quarterly 10% of interest - pretty good, no minimum, no fee). I am able to save about $1000-$1500 a month with my resident salary after paying bills, loans, food, car, etc... Make a budget!

3) 14% return: Open a ROTH IRA account during residency, max that baby out if you can. Interest grow tax free and you can take it out for your first home, kid's college, etc.. What to invest it in? You can start with funds that track the market if you want to play it safe. But at our age, go with stocks. We can afford the risk. msnmoney got some good stock picks and research. Was able to make 80% return on RVI over 3 years, sold the stock last month. There are also some lazy portfolio designs. Diversification is key dude!! know your goals, planning and trading style. Know when to back out of a losing bet :)

4) 19% return: Start paying back your student loans under IBR/PLS plan. You will shave 19% off your original student loan after 10 years, debt is gone. But the percent yield is different for everyone. Bottom line, IBR/PLS is great if you have huge amount of loans, married, got kids, plan to do fellowship.

5) 0% return but 100% gratification: Giving. Donate to Haiti. Donate to salvation army. Buy gifts for parents, family and love one. Give to your local church, shelter, etc. But if you tweak it enough, can deduct from your tax payment if the proceeds exceed the standard deduction allowed ;)

yellow-piggy-bank.jpg
 
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Question for lfesiam

So IBR plan will forgive your loan if you work in a 501(c) for ten years. My question is how this applies to anesthesiologists. A lot of anesthesiologists work for hospitals which are 501(c) entities does this time count? So if I do a 4 year residency and work for a private practice group who works for a hospital for 6 years is my loan forgiven?
 
PulseOx said:
Question for lfesiam

So IBR plan will forgive your loan if you work in a 501(c) for ten years. My question is how this applies to anesthesiologists. A lot of anesthesiologists work for hospitals which are 501(c) entities does this time count? So if I do a 4 year residency and work for a private practice group who works for a hospital for 6 years is my loan forgiven?
Click to expand...

Hi PulseOx,

From my limited understanding, if your loan repayment started before October 1, 2007 (read below), PLS might not benefit you. The catch is the QUALIFYING LOAN, REPAYMENT TYPE, SERVICER CHOICE, TIME OF REPAYMENT. PLS is designed specifically for those that use DIRECT LOAN servicer, a U.S. government entity versus a private loan servicer like CitiBank, etc...with a few exceptions. I would call your loan servicer for more info. Read more below:

This benefit is for people who work in certain "public service" jobs in government and nonprofit 501(c)(3) organizations (for details see What are eligible jobs?). The program will forgive remaining federal student loan debt after 10 years of eligible employment and qualifying payments.

You may qualify for Public Service Loan Forgiveness if:

* You have federal student loans in the Direct Loan program. Covered loans include Stafford, Grad PLUS, or Consolidation loans through the Direct Loan program.
o If your federal loans are not in the Direct Loan program, you may be able to switch (see box on the right to find out more).
* Your Direct loans originated before or after the loan forgiveness program was created, for either graduate or undergraduate study.
* You work full time in an eligible job.
* While working in an eligible job, you make qualifying payments for a total of 10 years (120 monthly payments which do not have to be consecutive). As long as you are in the Direct Loan program, these payments can be made through the Standard (10-year) repayment, Income Contingent Repayment (ICR), and/or Income Based Repayment (IBR) plans.
* You are still working full time in an eligible job and have debt remaining after 120 qualifying payments.

If you believe you meet these requirements, you likely qualify for Public Service Loan Forgiveness. However, only the Department of Education can confirm your eligibility, and it has yet to establish a formal application process.

Public Service Loan Forgiveness is not available for:

* Private (or "alternative") student loans, state loans, and other loans not guaranteed by the federal government.
* Payments made on federal loans in the Guaranteed (or FFEL) program.
o If your federal loans are not in the Direct Loan program, find out how to switch (see box on the right to find out more).
* Payments made under graduated or extended repayment plans.
* Payments made or work performed before October 1, 2007.

So answer to your question, So if I do a 4 year residency and work for a private practice group who works for a hospital for 6 years is my loan forgiven? Yes, it will be forgiven, if your group is a 501(c) + if you are not that far out from repayment (2007).
 
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J DUB said:
How you know that most hospitals in the US are 501(c)(3) organizations?

State-funded hospital....?
Click to expand...

Through self research by entering them here: http://www.irs.gov/app/pub-78/

Try it out!

Not necessary "state" hospital. Pick 5-10 cities across the U.S. Look up all the hospitals in those cities in the link above. Let me know what you find about the 501(c) status :)
 
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lfesiam said:
Through self research by entering them here: http://www.irs.gov/app/pub-78/

Try it out!

Not necessary "state" hospital. Pick 5-10 cities across the U.S. Look up all the hospitals in those cities in the link above. Let me know what you find about the 501(c) status :)
Click to expand...

I have put in several hospitals in my area and nothing came back...:confused:

it says for charities..
 
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lfesiam said:
- Pay about $400-$500 a month during residency (less if with kids and married)
Click to expand...

This is false.

The plan actually punishes married residents with spouses who have an income, which is not an uncommon situation. The amount that they calculated for my monthly payment was about 25% of our pre-tax income. Plus, in my case, my husband makes payments on his own student loans; this isn't accounted for in the IBR plan. It's just not a feasible option for married residents (unless maybe you have 5 kids or something, in which case the poverty line rule would come into effect).

From the IBR website listed above:
"Unfortunately, current IBR rules use your and your spouse's combined income to determine what monthly payment you can afford, but do not consider the burden of your combined student debt. This results in higher payments for both borrowers, a type of double-counting that is unfair and inappropriate for your situation."
 
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Also, the smartest thing you can do with money you save during residency is to fund a Roth IRA (contributions are after-tax, but you're not taxed when taking this money out after retirement). I'm not up on all the new rules for this year, but it used to be that we wouldn't be able to contribute to a Roth after getting out into the real world due to income restrictions.
 
stargirl50 said:
Also, the smartest thing you can do with money you save during residency is to fund a Roth IRA (contributions are after-tax, but you're not taxed when taking this money out after retirement). I'm not up on all the new rules for this year, but it used to be that we wouldn't be able to contribute to a Roth after getting out into the real world due to income restrictions.
Click to expand...

The rules have changed this year but it has more to do with conversions of traditional IRAs to a Roth. As of January 1, 2010, you can convert your traditional IRA to a Roth IRA regardless of your income or tax-filing status.

Previously, only investors with an adjusted gross income of $100,000 or less were able to convert a traditional IRA to a Roth.
 
stargirl50 said:
This is false.

The plan actually punishes married residents with spouses who have an income, which is not an uncommon situation. The amount that they calculated for my monthly payment was about 25% of our pre-tax income. Plus, in my case, my husband makes payments on his own student loans; this isn't accounted for in the IBR plan. It's just not a feasible option for married residents (unless maybe you have 5 kids or something, in which case the poverty line rule would come into effect).

From the IBR website listed above:
"Unfortunately, current IBR rules use your and your spouse's combined income to determine what monthly payment you can afford, but do not consider the burden of your combined student debt. This results in higher payments for both borrowers, a type of double-counting that is unfair and inappropriate for your situation."
Click to expand...

You can file your tax and ibr separately in that case but can count your kids.

I think the rule is changing this year on this. My above situation is true about the payment since I've been paying it since december! Unless they made some mistake :) Fortunately my wife is not a resident with tons of loan :). Stargirl is right though, if married and both are residents with no kids Ibr won't be good for you. If your wife make a crap load of money and combined income >100,000 = be cautious.... you might want to use the calculator below to see if the program will benefit you or not. Once again, you can file separately but you will give up the tax benefit of filing jointly.

If in doubt use the ibr calculator on the website: here

"The calculator indicates that I am not eligible for IBR when I include my spouse's income, but might be if I file my taxes separately from my spouse. Is this true, and if so, is there any disadvantage to filing separately?

It is true that you and your spouse are allowed to file your taxes separately in order to take advantage of IBR. However, you may lose certain tax benefits when you file separately, such as the Earned Income Tax Credit, or the ability to deduct the interest you pay on your student loans. Unfortunately there's no easy way to compare the benefits gained by lower payments through IBR and those lost by filing separately.

The U.S. Department of Education has agreed to revisit this rule and factor in both spouses' debts when calculating one applicant's IBR payments, but that change would not go into effect until as late as July 2010. Please sign up for our mailing list so we can keep you updated on these and other changes. More information is available here. "

And remember MS4s, your income in 2010-2011 is not your full resident salary since half of 2010, your earning is ZERO as a student. Hence, you may report that you did not earn any dough during that time and get your payment even lower!
 
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Don't quote me on this but another smart option:

Start filing IBR/PLS repayment with DIRECT loan just before you start your residency but after graduating from medical school (June). Report that your income is zero (if you did have any earned income during MS4 year), you will initially pay ZERO/month for the whole PGY-1 year tax cycle. = like a free year of deferment but it will still count toward your "10 years" plan since you entered "repayment" reducing it to only 9 years of repayment. This did not work for me because IBR kicked in around the Fall of 2009. (had to turn in our pay stubs during the paperwork process by then). Ask the AAMC lady/dude that come talk to you on this before you graduate.
 
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PulseOx said:
Question for lfesiam

So IBR plan will forgive your loan if you work in a 501(c) for ten years. My question is how this applies to anesthesiologists. A lot of anesthesiologists work for hospitals which are 501(c) entities does this time count? So if I do a 4 year residency and work for a private practice group who works for a hospital for 6 years is my loan forgiven?
Click to expand...

No, if you work for a group, then the group is not a 501(c), it just contracts with a 501(c) hospital. In order to qualify for foregiveness, you would need to be an actual hospital employee
 
WNT Signaling said:
No, if you work for a group, then the group is not a 501(c), it just contracts with a 501(c) hospital. In order to qualify for foregiveness, you would need to be an actual hospital employee
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correct. but there might be loop holes in this clause if the income the group is getting is from a 501(c) entity (will require a good tax accountant). however, your loan will be forgiven after 25 years of repayment based on IBR alone. President Obama will also be reducing this to 20 years come July + capping the repayment at 10% of income instead of 15%.
 
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Siam -

I might have to hit you up on a PM. Sounds like you have your **** together.

Regarding the IBR w/Direct Loans, I just set it all up, but as income CONTINGENT. What do I need to do next to get it to be "IBR"?

For side notes, I think the "10 yr repayment" for loan forgiveness is actually 120 payments toward Direct Loans, but in this case 120 payments doesn't necessarily equal 10 yrs. So the example listed above, where you register with Direct Loans with an income of zero would not buy you a free year, because you need to register 120 payments, not just 10 yrs time. Have you heard 120 payments or just 10 yrs?

Lastly, the big "risk" with the Direct Loans IBR is the great unknown regarding certain loan forgiveness. As I got to asking, (my financial aid officer in medical school, the folks at Sallie Mae, and the folks at Direct Loans) NO ONE would commit to saying the loan forgiveness program is fixed. They all say things like "The plan is for loan forgiveness after 120 payments/10 yrs...". While I really do like the idea of having a chunk of my loans forgiven, the math of loan forgiveness doesn't add up in the government's favor, and we know the house always wins. I cannot forsee them forgiving large chunks of debt to doctors...we're historically the lowest defaulters on our loans, so full repayment of the loans we take is virtually guaranteed. The country is swimming (or is it drowning?) in debt, and they're gonna give us a break? I'll believe it when I see it...perhaps as we close in on the time to begin forgiving loans they'll throw in some clause about having to work in a rural area or be assigned somewhere - as it stands now, places like Hopkins and The Brigham qualify as 503 (c). I guess time will tell.

Just my two cents.

dc
 
BIGD

Regarding the IBR w/Direct Loans, I just set it all up, but as income CONTINGENT. What do I need to do next to get it to be "IBR"?

simply call direct loan or your servicer! can be converted over the phone.

For side notes, I think the "10 yr repayment" for loan forgiveness is actually 120 payments toward Direct Loans, but in this case 120 payments doesn't necessarily equal 10 yrs. So the example listed above, where you register with Direct Loans with an income of zero would not buy you a free year, because you need to register 120 payments, not just 10 yrs time. Have you heard 120 payments or just 10 yrs?

120 payments - if you make 1 payment per month starting July 2010, the last payment will be June 2020.

Lastly, the big "risk" with the Direct Loans IBR is the great unknown regarding certain loan forgiveness. As I got to asking, (my financial aid officer in medical school, the folks at Sallie Mae, and the folks at Direct Loans) NO ONE would commit to saying the loan forgiveness program is fixed. They all say things like "The plan is for loan forgiveness after 120 payments/10 yrs...". While I really do like the idea of having a chunk of my loans forgiven, the math of loan forgiveness doesn't add up in the government's favor, and we know the house always wins. I cannot forsee them forgiving large chunks of debt to doctors...we're historically the lowest defaulters on our loans, so full repayment of the loans we take is virtually guaranteed. The country is swimming (or is it drowning?) in debt, and they're gonna give us a break? I'll believe it when I see it...perhaps as we close in on the time to begin forgiving loans they'll throw in some clause about having to work in a rural area or be assigned somewhere - as it stands now, places like Hopkins and The Brigham qualify as 503 (c). I guess time will tell.

I agree with you on this. Sounds way too good to be true. Crossing my fingers.:xf: Hopefully this can be finalize while we still have a liberal president ;)
 
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lfesiam said:
BIGD

I agree with you on this. Sounds way too good to be true. Crossing my fingers.:xf: Hopefully this can be finalize while we still have a liberal president ;)
Click to expand...

The problem is that canceling debt for individuals who do public service and pay through IBR for 10 years has been on the books since July 1, 2009, but the problem is that there is no guarantee. So, you might do IBR, but at year nine, the program will be cut, thus leaving you when tons of accrued interest that you would not have had you paid more than 10% of your income towards your debt. Until IBR is guaranteed on paper, it's a risky bet. A better alternative might be to figure out how much it would cost to pay-off your loans in 10 years after residency, then from this amount, pay your IBR payment, and the put the rest in a high-yield CD. If at year 10 your debt is cancelled, great, but if not, you'll have the money you saved to pay-off as much of your remaining debt as possible.

Another thing, and I'm not sure if this was addressed (some of the posts were kind of long), when you start IBR, your repayments are caped at how much it would cost to pay-off your loans in 10 years once you start repayment. For example, when you start residency, if it would cost $25,000 a year to pay-off all of your loans in ten years, then under IBR, you will never have to pay more that $25,000. So let's say at year 7, when you've been an attending for a few years, if you make $300,000 a year, you will not pay $30,000 a year, you will only pay $25,000 a year--this is the incentive to borrow as little as possible
 
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WNT Signaling said:
The problem is that canceling debt for individuals who do public service and pay through IBR for 10 years has been on the books since July 1, 2009, but the problem is that there is no guarantee. So, you might do IBR, but at year nine, the program will be cut, thus leaving you when tons of accrued interest that you would not have had you paid more than 10% of your income towards your debt. Until IBR is guaranteed on paper, it's a risky bet. A better alternative might be to figure out how much it would cost to pay-off your loans in 10 years after residency, then from this amount, pay your IBR payment, and the put the rest in a high-yield CD. If at year 10 your debt is cancelled, great, but if not, you'll have the money you saved to pay-off as much of your remaining debt as possible.

Another thing, and I'm not sure if this was addressed (some of the posts were kind of long), when you start IBR, your repayments are caped at how much it would cost to pay-off your loans in 10 years once you start repayment. For example, when you start residency, if it would cost $25,000 a year to pay-off all of your loans in ten years, then under IBR, you will never have to pay more that $25,000. So let's say at year 7, when you've been an attending for a few years, if you make $300,000 a year, you will not pay $30,000 a year, you will only pay $25,000 a year--this is the incentive to borrow as little as possible
Click to expand...

My state previously offered teacher loan forgiveness, but since then has reneged on this commitment. How certain is it that public service loan forgiveness will still exist ten years from now?

Public service loan forgiveness is authorized by federal law (the College Cost Reduction and Access Act of 2007). While nothing prevents Congress from repealing this provision, it is highly unlikely that they would do so without either grandfathering in current students or replacing it with a similar benefit.

The College Cost Reduction and Access Act of 2007 established a new public service loan forgiveness program. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments.

This contrasts with the loan forgiveness of the remaining balance after 25 years of repayment under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.

PS: There are grass roots groups that are making sure congress don't back out on their word. We're not alone.
 
IBR will now be based on your AGI (adjusted gross income) (line 37 on your tax 1040)... Got my loan payment reduced to $40 per month from $437!!!... + uncle sam is paying for your subsidized interests :) whoo hooooooo! Call your servicers to see if you can get this adjusted! This is important for the 2009 graduates (current PGY-1) and incoming interns, you will only work half a year for the tax year cycle of MS4 to PGY1 transition, your AGI should be half of what they calculated! Don't let the loan people base your repayment on a $46,000/year income, it should be around $23,000 (AGI).

new PSLF qualifier - loan forgiveness organization does not have to be 501(c)!
check it out dudes! - http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02 12 10.pdf

check out "Q24" on the link.

basically any hospitals and most private groups would fit the criteria. 6 payments down, 114 payments to go then poof! loan is gone!
 
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lfesiam said:
IBR will now be based on your AGI (adjusted gross income) (line 37 on your tax 1040)... Got my loan payment reduced to $40 per month from $437!!!... + uncle sam is paying for your subsidized interests :) whoo hooooooo! Call your servicers to see if you can get this adjusted! This key for the 2009 graduates (current PGY-1) and incoming interns, you will only work half a year for the tax year cycle of MS4 to PGY1 transition.

new PSLF qualifier - loan forgiveness organization does not have to be 501(c)!
check it out dudes! - http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02 12 10.pdf

check out "Q24" on the link.

basically any hospitals would fit the criteria. 6 payments down, 104 payments to go then poof! loan is gone!
Click to expand...

So what happens if you go to residency 5 years + 1 year fellowship, then join a private practice that does everything at Hospital X?

Do you lose the 10 year forgiveness then I would assume?
 
ChiDO said:
So what happens if you go to residency 5 years + 1 year fellowship, then join a private practice that does everything at Hospital X?

Do you lose the 10 year forgiveness then I would assume?
Click to expand...

no you don't lose it as long as your employer fit the criteria defined in the Q&A #24. on the pdf.

- emergency management
- military services
- public safety
- law enforcement
- public interest law services
- early childhood education
- public healthcare (nurses, NP, nurses in clinical setting, fulltime professional engaged in health care in healthcare practitioner occupation and health care support occupation)
- public education
- public library

basically if a non 501(c) private group provide some sort of "public services", they will qualify..i.e...providing anesthesia for a blend of private + medicare/medicaid patients would probably qualify.

now if your private group is a 501(c), then you obviously qualify. i.e. if you plan on doing academia.
 
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shift_roro said:
Actually, wouldn't that no longer qualify you since you are no longer employed by a non-profit organization?
Click to expand...

I am not exactly sure. But if your group works for a non-profit hospital, i think the rule can be work around. Will keep you guys posted as more updates come up!
 
lfesiam said:
Yep that counts :) sweet isn't it?
Click to expand...

Hi everyone,

Can I make repayment for my student loan while I am in medical school? I've read the policy on FASFA website and they did not say anything about I could not do so. Based on IBR calculator, I will pay $0 for my repayment. Would it still count toward my 20-year loan cancellation?

One more question, can my student loan combine with my spouse's? If my spouse works for the non-profit hospital for 10 yrs and have her student loan forgiven, should mine be forgiven as well?

Thanks for your advice
 
Asianboy said:
Hi everyone,

Can I make repayment for my student loan while I am in medical school? I've read the policy on FASFA website and they did not say anything about I could not do so. Based on IBR calculator, I will pay $0 for my repayment. Would it still count toward my 20-year loan cancellation?
Click to expand...
I'm pretty sure the bank will take your $$$ any time.
One more question, can my student loan combine with my spouse's? If my spouse works for the non-profit hospital for 10 yrs and have her student loan forgiven, should mine be forgiven as well?
Click to expand...

Doubtful.
 
shameful all of you...

if you take out loans, and sign on the line promising repayment, you should repay it. i resent having to repay YOUR debts through MY taxes (directly or indirectly).

Truly shameful... God help the USA when physicians have this mentality...
 
Surfer said:
shameful all of you...

if you take out loans, and sign on the line promising repayment, you should repay it. i resent having to repay YOUR debts through MY taxes (directly or indirectly).

Truly shameful... God help the USA when physicians have this mentality...
Click to expand...

media_preview.php
 
Student loan borrowers often have a diverse portfolio of loans with a variety of interest rates. Thus, the optimal repayment strategy will vary by borrower based on their loan portfolio, future employment plans and expected salary both near-term and long-term. All borrowers should evaluate and understand their options to ensure the appropriate repayment strategy is utilized in order to achieve the greatest savings.
Fortunately, the government created programs that provide health professionals with the opportunity to improve their liquidity and lower the cost of their student loan debt. Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF) are two such programs which can offer eligible student loan borrowers the opportunity to save thousands. To recognize the greatest savings, initiating the process for utilizing these programs should begin prior to graduation. Benefits of these programs include:

  • IBR: Limits monthly loan payments to 15% of borrowers’ discretionary income, and for up to three years after repayment begins, the government will pay any interest on their subsidized loans not covered by their reduced monthly payment. Additionally, after 25 years of qualifying payments, any outstanding balance is forgiven. In 2014, program enhancements will go into effect for new borrowers, which will limit monthly payments to 10% of discretionary income and forgive outstanding loan balances at the end of 20 years.

  • PSLF: Provides tax-free loan forgiveness to federal loan borrowers who make 120 qualifying payments while working for an eligible employer, such as a non-profit hospital or university. Unlike other forgiveness programs, there are no limitations regarding geography, type of medicine practiced, or types of patients treated.
Borrowers who will most likely not be eligible for IBR or PSLF should consider alternative repayment strategies to lower the cost of their debt. One strategy is targeted repayment, a plan which focuses on retiring higher rate debt more quickly in order to lower the interest cost of a borrower’s debt portfolio. Targeted repayment is accomplished by directing a majority of a borrower’s monthly loan payment toward the higher rate debt. Federal loan repayment options such as forbearance, extended payment plans, and deferment may be applied toward lower interest rate loans in order to free up additional funds which can then be used to target the higher rate debt. Although this strategy is rarely practiced, borrowers are strongly encouraged to consider it as a repayment option, as the interest savings can be substantial.
 
Based on the above post if you owe big money in loans like $200K plus then why not do a Fellowship and get a good gig in Academia?

If you work for Academics making $350K the govt. :)eek::eek:) will forgive your debt after 10 years.

Here is how it works:

1. Pay taxes on your $350K which nets $250K.
2. You need money to live on so your discretionary income is $150K.
3. You owe $15K per year for ten years.
4. Forget the interest and principle, the max you pay is $150K.
5. This saves you at least $100K (much much more if you owe more than $200K)
6. Get a gig with really good benefits like College education for your kids, 401K, etc.
7. You may end up with a 1099 on the "loan forgiveness" portion of $100K which means you owe taxes. Im uncertain as to that fact.

Now, we are incentivizing those who owe the most money to stay in Academics and let the TAXPAYER foot the bill. Nice.
 
This post is entirely too complicated. Needlessly so.

1) the 501(c)3 forgiveness is not a program you enroll in, but rather a somewhat badly worded item in an act of congress that cam be repealed at any time, without penalty to the government, and must be proven AFTER the fact. In other words, you have to provide ten years worth of documentation to a government agency akin to the IRS who will them deem it real or not.

2) Just buy a darn house. Instead of paying rent, which goes to nothing, take out a mortgage, which builds equity, and usually around the same monthly price. The tax code is rigged to make home buying a good investment, and interest rates will NEVER be lower. After 5 years, cash out your equity, use the money to pay off your loans in full, and refinance an analogous amount if debt at a MUCH lower interest rate that Stafford or Plus, with mortgage interest being tax deductible along with the advantageous homestead exemption.

You want an easy way out of your loans? Buy a house and stop wasting money on rent. Leasing real estate is the biggest scam in the United States.
 
For the four years beginning with the downturn in mid 2006, the median price of an existing home nationwide fell by 27%, or 7.7% annualized, according to Fiserv Case- Shiller, a home-price research firm. (At the worst of the decline, a year ago, prices had fallen 30%.) The median home now sells for $177,000, a bit more than what it would have fetched in 2003.
 
Now is a great time to buy a home. 3.5% mortgage rates and homes BELOW construction costs (they are much cheaper to buy used than build new).
 
If it was up to me (it isn't) there is NO WAY I would allow any student a free ride on the taxpayer's dime. It isn't the American way. It isn't what the Founders intended for this country.

I have no problem with 25 year repayment plans but the student owes the taxpayer ALL the money.

Ron Paul is 100% correct in his statements that the Federal government has no Constitutional authority to be in the student loan business at all.

http://www.youtube.com/watch?v=Bvlj0BxR1ZY
 
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Paul: Education Department and Student Loans Should be Abolished

Earlier this month on NBC’s “Meet the Press,” Ron Paul said that if he were elected president he would not only get rid of federal student loans but he would abolish the Education Department altogether. Paul said that the federal student loan program was a failed program that burdened students with $1 trillion of debt at a time of when there are no jobs and the quality of education is deteriorating.
Paul blamed the intervention of the government in education for rising tuition costs and cited the Education Department as one of five Cabinet departments that he would eliminate as part of a plan to cut $1 trillion from the federal budget. Although the demise of federal student loans was not included in his plan, he said he’d eventually kill the program.
“Just think of all this willingness to want to help every student get a college education,” said Paul, who holds a medical degree from the Duke University School of Medicine. “I went to school when we had none of those. I could work my way through college and medical school because it wasn’t so expensive” (“Ron Paul: End U.S. Student Loans,” Politico, Oct. 23, 2011).
 
I used the IBR calculator with the info you provided; 210k debt, 300k salary, single/married.

Result:

Based on the information you have provided, you would probably not qualify for IBR.
Click to expand...
 
urge said:
I used the IBR calculator with the info you provided; 210k debt, 300k salary, single/married.

Result:
Click to expand...

How about PSLF? That's the portion of the law most applicable to Anesthesiology (if it applies at all).

If Obama's "free lunch" doesn't apply to you yet I bet another 4 years may do the trick.;)
 
I would not count on IBR. It's a program that is not "binding" in the sense that you are not signing any contract as of yet....

Ie, the government could disqualify or cancel the program if it "needed" to find extra revenues circa 2018.

Furthermore, it does not make financial sense. Wealthy people know about the compounding value of money, and the benefit of investing over time. If you have any savings / dividends, these will all be taxed per IBR. Thus, it does not make much sense to me...

I would rather just live cheap, and make sacrifices and pay off the debt ASAP.





BLADEMDA said:
Paul: Education Department and Student Loans Should be Abolished

Earlier this month on NBC’s “Meet the Press,” Ron Paul said that if he were elected president he would not only get rid of federal student loans but he would abolish the Education Department altogether. Paul said that the federal student loan program was a failed program that burdened students with $1 trillion of debt at a time of when there are no jobs and the quality of education is deteriorating.
Paul blamed the intervention of the government in education for rising tuition costs and cited the Education Department as one of five Cabinet departments that he would eliminate as part of a plan to cut $1 trillion from the federal budget. Although the demise of federal student loans was not included in his plan, he said he’d eventually kill the program.
“Just think of all this willingness to want to help every student get a college education,” said Paul, who holds a medical degree from the Duke University School of Medicine. “I went to school when we had none of those. I could work my way through college and medical school because it wasn’t so expensive” (“Ron Paul: End U.S. Student Loans,” Politico, Oct. 23, 2011).
Click to expand...
 
Quirk11 said:
I would not count on IBR. It's a program that is not "binding" in the sense that you are not signing any contract as of yet....

Ie, the government could disqualify or cancel the program if it "needed" to find extra revenues circa 2018.

Furthermore, it does not make financial sense. Wealthy people know about the compounding value of money, and the benefit of investing over time. If you have any savings / dividends, these will all be taxed per IBR. Thus, it does not make much sense to me...

I would rather just live cheap, and make sacrifices and pay off the debt ASAP.
Click to expand...

I agree that loan forgiveness is likely all smoke and mirrors and could easily be revoked at will. I keep telling this to my colleagues but for some reason they trust the gov, even in uncertain times like today.

However, I am planning on doing IBR since the gov will help pay some of the interest on several of my loans for 3 years IIRC. I figure it's better than forbearance/deferment, and with a wife and kids to support, it seems like an affordable option for payment during residency. I definitely plan on living cheap post residency and paying off my loans asap. No way would I hold my breath waiting for government student loan programs to come to fruition.
 
kazuma said:
I agree that loan forgiveness is likely all smoke and mirrors and could easily be revoked at will. I keep telling this to my colleagues but for some reason they trust the gov, even in uncertain times like today.

However, I am planning on doing IBR since the gov will help pay some of the interest on several of my loans for 3 years IIRC. I figure it's better than forbearance/deferment, and with a wife and kids to support, it seems like an affordable option for payment during residency. I definitely plan on living cheap post residency and paying off my loans asap. No way would I hold my breath waiting for government student loan programs to come to fruition.
Click to expand...

Prudent and wise :thumbup:
 
BLADEMDA said:
Now is a great time to buy a home. 3.5% mortgage rates and homes BELOW construction costs (they are much cheaper to buy used than build new).
Click to expand...

3.5% is a teaser. Rates are very low but when the deal is sealed it always ends up being higher it seems.
 
Section31 said:
2) Just buy a darn house. Instead of paying rent, which goes to nothing, take out a mortgage, which builds equity, and usually around the same monthly price. The tax code is rigged to make home buying a good investment, and interest rates will NEVER be lower. After 5 years, cash out your equity, use the money to pay off your loans in full, and refinance an analogous amount if debt at a MUCH lower interest rate that Stafford or Plus, with mortgage interest being tax deductible along with the advantageous homestead exemption.
Click to expand...

No offense but I think this is unsound advice and nothing is ever this simple.

The first years of a mortgage on the amortization schedule are mostly interest payments. Only a small amount of equity is built.

Closing costs, taxes, repairs, etc. eat up much of that equity.

Selling a house in a down market can be BRUTAL.

Be very careful of this strategy.
 
Arch Guillotti said:
No offense but I think this is unsound advice and nothing is ever this simple.

The first years of a mortgage on the amortization schedule are mostly interest payments. Only a small amount of equity is built.

Closing costs, taxes, repairs, etc. eat up much of that equity.

Selling a house in a down market can be BRUTAL.

Be very careful of this strategy.
Click to expand...

Yeah some of my residency classmates (Cleveland) got stuck in BAD situations. Realtors were routinely telling people here to take 30-40% off what they paid for a house 4 years ago as their starting price.
 
Question:

Wife and I both physicians, both about 250K in debt.

Both work for either the government or non-profit hospital, but consolidated our loans with nelnet about 5 years ago in residency. We have been working as attendings and paying our loans for 3 years (on a 25 year repayment plan).

Does the PSLF work for us? Would we first have to transfer the nelnet loans into direct loans?
 
I spent a couple hours on the phone tonight with direct loan servicing and fed loan servicing. Some of my loans have to be put in temporary forbearance (at the tune of $26/day, $806/mo in interest that will be added to the principle:mad:) until DCL finishes consolidating my loans. So basically, I'm accruing over $1000/month, maybe even closer to $1500/month in interest not including the $806/month forbearance interest that is accruing while DCL consolidates my loans. :eek: Sickening.


hpb214 said:
Question:

Wife and I both physicians, both about 250K in debt.

Both work for either the government or non-profit hospital, but consolidated our loans with nelnet about 5 years ago in residency. We have been working as attendings and paying our loans for 3 years (on a 25 year repayment plan).

Does the PSLF work for us? Would we first have to transfer the nelnet loans into direct loans?
Click to expand...

I believe so. Do you have any idea what it would cost in the long run to consolidate you loans into DL's vs keeping them with your current holder and payment plan? If it isn't much of a difference, then it seems like you have nothing to lose. If PSLF magically operates and is funded like they say it is, then your loans will be forgiven in after 120 direct loan payments. If it fails, then you could switch to a more aggressive payment option to pay of the remaining balance.

I honestly have a tough time believing or trusting anything coming from the government of an economically depressed and debt ridden country. Money streaming in from student loans is a solid source of revenue for the government and it seems silly that they'd forfeit it through PSLF in order to help out us filthy rich/greedy physicians.
 
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