Confused on why everybody is recommending REPAYE over PAYE (starting residency in July)

DummyHippo

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My financial aid office is probably giving me at least partially incorrect advice (like you can waive your grace period which isn't true), but I was hoping to get some help clearing up my confusion.

I am single and owe about 165000 total (6000 in perkins, rest direct)

Are these points correct?
1) The whole point of consolidation is to waive off the grace period if I plan to pursue PSLF and get a head start on my payment. Although the interest will be higher the head start of a few months makes it worth the higher interest.
2) My payment between PAYE and REPAYE is the same, however if I expect to be an attending with salary at least 25000 by year 7, PAYE seems to make more sense because the payment is capped at 10% of the original principle whereas REPAYE is uncapped. Seems like REPAYE is the way to go if you plan to refinance after becoming an attending, but if I plan on staying academic (want to specialize in internal medicine so there is a high likelihood) and pursuing PSLF I don't see why it would be advantageous in this scenario. I've used the AAMC calculator and it seems going through PSLF I actually pay less and get more forgiven through PAYE.
3) If points 1 or 2 are correct, I am failing to see why REPAYE is so popular despite the 50% interest subsidy because the AAMC calculator shows that I actually end up saving more with PAYE for PSLF if we factor in my attending salary, and especially if I do get married over the next 10 years since REPAYE penalizes you for that.
 

SigmaFS

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Your points are correct. But, what if you don't pursue an academic setting & qualifying PSLF employer? Would you have been better off selecting REPAYE? Also, what % of MDs/DO'S pursue PSLF? I think the vast majority don't, therefore is REPAYE is likely the better option.
 
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WalSlave

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REPAYE is also capped at 10% of income. PAYE is only “capped” in that if your 10% happens to be higher than the 10-year standard payment, you won’t pay more than the standard amount. So depending on your finances and loan balance the cap may not affect you at all, or it may be a huge deciding factor.
Edit: I realized you were also conveying this, but I’ll leave it for discussion sake.

But anyways, point being that choosing one or the other is completely contingent upon your situation - loan amount, current salary, projected salary, single vs. married, filing jointly vs. separate, dependents, spouse salary, and yadda yadda so on. The numbers will play out differently for everyone. There is no one size fits all answer, especially for docs who make a huge variety of salaries and have loan balances all over the place. If you’ve ran the numbers then PAYE is better for you.
 
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TMP-SMX

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Sometimes you can waive your grace period if you consolidate immediately to one loan under REPAYE or PAYE and then file an employer certification form perhaps on August 1st of your internship. It will take a couple months to transfer during administrative forbearance then fedloans after that. Good luck.

Depending on your location you might have limited options for nonprofits. REPAYE has a much much better subsidy for interest if you really plan on 6 years of postgrad training for residency and fellowship. It covers unsubsidized interest while PAYE does not. If you end up not doing PSLF this is a significant difference in what you end up paying in the end.

Keep in mind you can stay in REPAYE during residency and switch to PAYE while still eligible even in your first half year as an attending and would still be eligible to switch as long as you still meet partial financial hardship. Keep in mind your recalculation of payments when you recertify are based on previous year's taxes. Yes your interest will capitalize when you switch but you'll have to do the math to see if it will be beneficial between payments as an attending in PAYE vs REPAYE. The calculators aren't perfect since you really need to go year by year with your income to determine payments and what your final forgiveness will end up being. Also if married and have children your payments in REPAYE could certainly still be lower than PAYE if you don't make a lot as an attending.

You should also join the PSLF-eligible physicians facebook group if you want more input.
 
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DummyHippo

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Thank you guys for all the great advice! Yes that's exactly my dilemma. I'm strongly interested in academic, so I'm leaning towards PSLF since the overall payment is much less. Great point about switching from REPAYE to PAYE though, I'll definitely look into it. But I guess if I'm going through PSLF REPAYE interest subsidy doesn't really matter to me since I'm just trying to keep my payment as little as possible for 10 years and payment is based off the principle. After 10 years, whatever subsidized interest I save going through REPAYE rather than PAYE will be forgiven with PSLF anyways,
 
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striveforthebest

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So I am currently in a dilemma if I should pursue PSLF vs refinance. I have a $250,000 loan, married with one child, and about to start my IM residency and on planning to pursue a fellowship afterwards. So this gives me approx 6 years in a non-profit. My question/dilemma is that if I pursue PSLF through REPAYE and end up joining a private group after my training, how does the remaining amount of my loan work out? Will I be kicked out of PSLF and be responsible for the remainder through standardized repayment? If so, is it better to refinance from the beginning? Would appreciate an input on which option might be the best for me. Thank you so much!
 

TMP-SMX

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So I am currently in a dilemma if I should pursue PSLF vs refinance. I have a $250,000 loan, married with one child, and about to start my IM residency and on planning to pursue a fellowship afterwards. So this gives me approx 6 years in a non-profit. My question/dilemma is that if I pursue PSLF through REPAYE and end up joining a private group after my training, how does the remaining amount of my loan work out? Will I be kicked out of PSLF and be responsible for the remainder through standardized repayment? If so, is it better to refinance from the beginning? Would appreciate an input on which option might be the best for me. Thank you so much!
You don't get kicked out of PSLF. If you go private for a couple years you could still potentially go back towards PSLF if you work for a nonprofit after that. The risk is that you are making larger payments when out and that your forgiveness will end up being less. Depending on your repayment plan your payments could be capped. If you are certain you will not work for a nonprofit long term then refinancing to private is probably cheaper after residency. REPAYE during residency is a good option for people like that due to interest subsidy.